Canada's oilpatch sheds almost $9B in spending: IHS Markit

Canada's oil and gas sectorhas slashed spending plans across the industryby $8.9billion amidthe economic falloutof the novel coronavirus,according to new estimates.

IHS Markitsays while the bulkof thecuts havebeen made by large oilsands producers, there have also been "sizeable" spending reductions toconventional, unconventional, midstream and petrochemical projects.

It pegs the reductions in capital spending in oilsandsalone ataround$4.4 billion.

"Western Canada is accustomed to price volatility," IHS Markitsaid in an analysis released Tuesday."However, the scale of this demand shock is unprecedented."

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The impacton the sector, it adds, is expected to be "protracted, deep with long lasting ramifications" for the industry, jobs and the overall economy.

Canada's oilproducers have been hit hard byoil prices that have plunged worldwide.

OPEC and its allies tried over the weekend to shore up global prices with an agreement to cut back production, but concern remains it's not nearly enough to address a massive fall in demand dueto the pandemic'seconomic impact.

Indeed, the International Monetary Fund's latest outlook says the global economy is projected to contract threeper cent in 2020, much worse than during the 2008-09 financial crisis. It expectsworld oil prices to improvein the coming years but remain wellbelow last year's average levelthrough 2023.

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In recent weeks, the price ofheavy crudefromwestern Canada hasfallen to well below $10 US a barrel, promptinga number of major producers to announce deep spending cuts.

IHS Markit's preliminary estimate indicates that capital spending in the upstream oilsands in 2020 may be at their lowest levels in over 15 years.

It also expects drilling activity in western Canada will fall further this year, adding it was already near record lows. IHS pegs the amount of capital spending cut by conventional and unconventional energy producers at more than $3 billion.

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Alberta's provincial government has said it expects Ottawa to come to the aid of the sector soon, including some form of credit backstop and help with cleaning up after orphaned oil-and-gas infrastructure.

It's been weeks since Finance Minister Bill Morneau saidassistance was "hours, possibly days" away. Prime Minister Justin Trudeau was asked Tuesday about when the federal government would deliver such a package.

"We will and we are looking at more specific, sector-related relief and supports for those sectors that are hardest hit, whether it's the tourism sector, the airline sector or the oil and gas industry, or others," Trudeausaid.

"We will have more to say on that shortly."