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Low oil and natural gas prices are hurting the industry as drilling activity in Western Canada falls and is expected to decline further in 2026.
North American oil prices remain below $60 a barrel after rising to more than $80 in January.
As a result, oil and gas companies are cutting costs, with overall capital spending expected to fall 5.6 per cent this year and another 2.2 per cent in 2026, according to an industry report released Wednesday by Calgary-based Enserva, which represents oilfield services companies.
The total number of wells drilled in 2025 is expected to decline by nine per cent compared to 2024, including a 16 per cent decline in British Columbia.
In Alberta, drilling activity is expected to decline by seven per cent this year, while Saskatchewan is expected to decline by 10 per cent. Drilling activity is projected to decline by a further four percent in both provinces in 2026.
Natural gas prices in Canada have also struggled, including in September when they fell below zero and even fell to below zero. negative. This has forced some companies to stop production to avoid having to pay gas fees.
Canada began exporting natural gas off the coast of British Columbia this year as LNG Canada began operations. A several other LNG projects are under development or construction.
“Canada's energy industry is going through a period of adjustment, but long-term fundamentals, particularly for natural gas, remain encouraging,” Gurpreet Lail, CEO of Enserva, said in a statement.
“As Canadian LNG production ramps up, Canadian producers will be able to benefit from robust global prices once short-term pressures ease in the new year.”
The Enserva report paints a bleak picture for the oil industry in the years ahead, as it mentions that three major forecasting agencies (Sproule, GLJ and McDaniel) do not expect oil prices to recover until 2029 from 2024 prices.
Oil and gas service companies began cutting jobs this spring and will “continue through the end of 2025, remaining at the same level in 2026,” according to the Enserva report.
Prime Minister Mark Carney and Alberta Premier Daniel Smith are expected to announce the agreement in Calgary, which will grant the province special exemptions from federal environmental laws and offer political support for a new oil pipeline to the British Columbia coast.
