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GDP-choking austerity isn't just for Greek and Spanish legislators any more. It has arrived in the Canadian oil patch, too.

Resource heavyweights Suncor Energy Inc. and Talisman Energy Inc. both announced capital-spending cuts last week. Suncor (which slashed $850-million from its 2012 capital budget) and Talisman (which is reducing capex by about $1-billion in 2013 compared with 2012) could be the tip of a very big iceberg over the next couple of months, as oil and gas companies roll out their spending plans into a low-priced and increasingly uncertain environment for Canadian energy.

New numbers crunched by Calgary energy specialist ARC Financial Corp. predict that capital spending in the oil patch will tumble about 15 per cent in 2013. That's on top of a decline of nearly 20 per cent in 2012, which has already left capex at its lowest levels since 2005. If the forecast is accurate, capital spending in the sector will be in the ballpark of $42-billion next year – about $20-billion less than was spent in 2011.

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The belt-tightening has significant implications for the broader Canadian economy. Up until this year, the energy sector was one of the key drivers of the post-recession recovery. According to Statistics Canada, mining and oil and gas extraction are expected to account for about 22 per cent of all capital expenditures in Canada this year; the energy sector accounts for a bit more than half of that.

The slowdown in the oil patch is already being reflected in broader measurements of growth. Last week's distressing gross domestic product report, which showed GDP slipped 0.1 per cent in August, indicated that the biggest culprit was slowing activity in mining and oil and gas extraction, which slumped 0.7 per cent in the month and is down 3.7 per cent year-over-year.

Weak prices for oil and natural gas are a key element in the slowdown; indeed, ARC Financial's forecasts are based specifically on forward pricing expectations for oil and gas, which will reduce cash flow and, by extension, funds available for capital spending. But Peter Tertzakian, ARC's chief energy economist, insists there's more to it than that. We're in the midst of a sea change in "the fundamentals of the industry," he says – and this is, increasingly, causing oil and gas executives to hesitate on major spending decisions.

On the heels of the revolution of shale gas that has utterly changed the industry's approach to natural gas investment, the industry is now seeing a potentially equally dramatic rise in unconventional light-oil development. Much as with shale gas, this involves using advanced technologies to unlock oil from shale and similar difficult-to-access rock formations. The rise of so-called "light tight oil" offers a major alternative to the high cost and long timelines of oil sands projects – and has companies re-evaluating their long-term strategies.

Toss on top of this a debate about how supplies will be delivered – new pipeline options, rail, Asian markets, and the potential of liquefied natural gas plants are all being discussed – and there are suddenly a lot of different directions that capital can be pulled. These are once-in-a-generation changes, and no one wants to bet the farm on the wrong pony. The uncertain environment could remain a drag on energy capex for years, even if commodity prices rebound.

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