General Commentary

Alberta’s oil and gas sector in Fall 2025 is projected to see record oilsands production and increased oil output, driven by new projects and the successful expansion of the Trans Mountain pipeline. Capital spending is expected to rise by 7.4% to $18.0 billion, supported by favorable prices and lower interest rates, though pipeline capacity constraints are anticipated to become a factor.

2025 In Summary

Production:

• Oilsands production is on track to reach an all-time high, with a 5% growth forecast for 2025 compared to the previous year.
• Overall oil production is expected to continue growing, with an additional 300,000 barrels per day anticipated between 2025 and 2029.
• New projects, such as the Narrows Lake oil sands project, are contributing to higher production forecasts.

Capital spending:

• Capital expenditures are projected to increase by 7.4% in 2025 to $18.0 billion, driven by higher prices, lower interest rates, and increased drilling activity.
• Spending is expected to grow further to $18.9 billion in 2026.
• Producers are targeting light and ultra-heavy crude formations with better economic returns.

Market access and constraints:

• The expanded Trans Mountain pipeline is providing new market access to the U.S. West Coast and Asia, boosting Canadian crude prices.
• However, as production grows, the industry is expected to encounter pipeline constraints, particularly as the Trans Mountain pipeline reaches capacity.

Oil prices:

• The Trans Mountain pipeline expansion has been a key factor in narrowing the price differential between Canadian crude and WTI.
• Prices remain subject to various market factors, including global demand and potential tariffs, which could impact short-term pricing and differentials.

Government initiatives:

• Alberta’s government is actively working on new pipeline projects and is exploring a potential new one million barrel per day pipeline to the West Coast, though private sector investment remains uncertain. 

Looking Forward

Canada’s oil and gas outlook for 2026 points to modest production growth for both oil and gas, driven by the completion of the Trans Mountain pipeline expansion and the start of LNG exports, which will open new markets and narrow price differentials. While industry sentiment is cautiously optimistic, a major commodity price increase is needed for significantly higher investment, and challenges like U.S. tariffs and a potential global market reset with increased supply growth continue to create uncertainty