Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

A multibillion-dollar government aid package for Canada’s energy industry could be at least week away from being finalized as federal officials deal first with financial supports for people across the country to contain the economic fallout from the COVID-19 crisis.

The oil and gas sector is reeling from a massive drop in revenues owing to the contagion and an oil-price war being waged by Saudi Arabia and Russia.

A report released on Monday by TD Securities Inc. pegged spending cuts by energy companies in North America at US$20-billion as they struggle to stay afloat, and more reductions are on the way. Of the total, Canadian companies have slashed spending by more than US$3-billion.

Story continues below advertisement

The industry had expected the federal and Alberta governments to announce details of a support package this week. This is now unlikely, according to a senior federal source not authorized to speak publicly on the matter.

“This week’s focus is passing legislation to deliver a COVID-19 emergency response package for all Canadians,” the source said. “Work is under way on further support for energy and other impacted sectors of our economy.”

Oil prices have tumbled by more than 60 per cent this year as the global response to the coronavirus has sapped demand, and Saudi Arabia and Russia have cranked open the taps to wrest market share from each other. Neither has signalled any intention to relent, and they are exacting economic pain on other oil-producing countries, including Canada and the United States.

On Monday, the price of benchmark West Texas Intermediate crude climbed by 73 US cents to US$23.36 a barrel, a level that still renders most North American oil operations unprofitable.

In Canada, the federal and Alberta governments – both facing recession worries – are devising a series of measures to help the industry cope with plummeting revenues and the prospect of reduced access to credit, which could lead to mass layoffs. Alberta has already announced it will waive fees collected by the Alberta Energy Regulator from the industry, and extend oil and gas leases by one year, to give resource companies more time to raise capital and plan.

Alberta Premier Jason Kenney said on Monday that talks with the federal government about support for the sector are still going on. He said he would welcome direct federal government investment into oil and gas reclamation.

“That would create good, blue-collar jobs in the oil field service sector into work this spring as many people are being laid off,” Mr. Kenney said.

Story continues below advertisement

Last week, federal Finance Minister Bill Morneau mentioned plans to help finance the cleanup of orphan oil and gas wells as well as approaches that enable companies "to bridge through the challenging time.”

Cuts to Canadian and U.S. capital spending by energy companies represent more than 31 per cent of corporate 2020 budgets, TD Securities said in a report to clients.

The clawback could reduce forecast production by 1.3 million barrels a day (b/d). To put that figure into perspective, combined U.S. and Canadian production is 17 million barrels of oil equivalent a day. In addition, roughly one-third of the forgone output would include associated natural gas and natural gas liquids, rather than crude oil.

“This is a massive reduction, but pales in comparison to near-term global demand destruction,” TD analyst Aaron Bilkoski said in the report. Various estimates peg the demand drop at eight million to 11 million b/d this year, from global consumption of 100.75 million b/d in 2019, according to the U.S. Energy Information Administration.

The TD report notes that global cuts in corporate budgets will likely be much greater, particularly when factoring in cuts from major oil companies. Five of those – Royal Dutch Shell PLC, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA – have collective annual spending of US$100-billion on upstream operations.

“While some have signaled spending reductions, the magnitude of these reductions has not yet been specified,” Mr. Bilkoski wrote.

Story continues below advertisement

Calgary-based Cenovus Energy Inc. has cut its capital budget by 32 per cent, putting possible expansions at its Christina Lake and Foster Creek oil sands projects on hold and suspending other plans.

Husky Energy Inc. has reduced its spending by $1-billion. On the weekend, it suspended the expansion of its White Rose project off Canada’s East Coast – an annual expenditure of several hundred million dollars – citing COVID-19 risks for the construction work force.

Canadian Natural Resources Ltd. clawed back its capital spending by more than $1-billion and reduced executive salaries. President Tim McKay’s compensation is being cut by 20 per cent.

As large as the drop in capital spending is, the corresponding drop in expected output is unlikely to counteract the destruction of global oil demand owing to the economic slowdown caused by the fight to contain COVID-19.

“While the price war remains the focal point of the oil price plunge, the demand side of the equation has taken the oil market hostage and will define the near-term price path as the market searches for a bottom,” said Michael Tran, managing director, global energy strategy for RBC Capital Markets. “In other words, while [capital spending] cuts are piling up in a hurry, oil demand destruction is currently multiples of the supply response.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the authors of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies