Canada’s Oil and Gas Industry: Industrial Outlook, Winter 2006

As oil and natural gas prices slowly recede from their recent highs, profits in Canada’s oil and gas sector will drop this year from the peak of $28.3 billion they reached in 2005.

Although profits are expected to continue weakening over most of the forecast horizon, they will still average $18.2 billion per year. A steady, but not steep, drop in oil and natural gas prices, together with a gradual decline in natural gas production, will reduce revenues. Costs will also fall, but not by more revenues, thereby contributing to the weaker profits. The oil and gas sector’s profit margin will fall from 18.3 per cent in 2005 to 11.7 per cent by 2010.

The outlook includes an analysis of oil and gas markets and pricing, as well as special looks at a potential new refinery in Alberta and at anticipated increases in the sector’s tax bill.