Canadian Natural Resources' Horizon oilsands site. Canada's largest oil and gas producer is boosting production and capital spending. (Credit: Canadian Natural Resources Ltd.)
Canadian oil and gas producers are holding the course on planned production hikes in 2025 while steeling themselves for more volatility in the form of Donald Trump’s proposed trade tariffs and political uncertainty in Ottawa.
Canadian Natural Resources Ltd. (CNRL) on Thursday said it plans to boost output by 12 per cent this year to between 1.51 million and 1.56 million barrels of oil equivalent per day, though the vast majority of the increase is attributable to acquisitions, including the US$6.5-billion acquisition of Chevron Corp.‘s oilsands assets, announced last October.
Canada’s largest oil and gas producer said the production boost comes with an increase in capital spending in 2025 to $6.15 billion, up from $5.4 billion in the previous year.
CNRL and other Canadian producers have recently profited from the weaker loonie and a narrowing price discount on the benchmark price for Western Canada Select (WCS). Canadian heavy oil prices have been strengthened by the Trans Mountain pipeline expansion (TMX), which has enabled producers to increase their output and created new buyers for their product.
CNRL president Scott Stauth said the company has benefited from increasing its share of space on the key pipeline route from Alberta’s oilsands to the Port of Vancouver.
“We could continue to see strong WCS pricing here for the foreseeable future and we’ve obviously taken some capacity from that regard (and) made sure we can move our barrels through there, so I think we set ourselves up in a pretty enviable position,” he said during a conference call with investors on Thursday.
CNRL also said it is planning to spend $90 million in 2025 on engineering work for the carbon capture and storage projects it is pursuing through the Pathways Alliance consortium, a group of major oilsands companies that have been cooperating on a proposed $16-billion emissions reduction plan.
But in a demonstration of the uncertainty caused by political volatility at the federal level, CNRL executives faced questions from analysts about whether the Pathways project was at risk of being cancelled following Prime Minister Justin Trudeau’s announcement earlier this week that he will resign once the Liberals choose a new leader.
“We’re looking at the project to have the ability to move forward here. We continue to focus on the fiscal side of things in terms of all the parties coming together on this. So, I think we’re a little bit more positive than you’re suggesting,” Stauth said. “We’re progressing these carbon capture projects on from an engineering perspective for 2025.”
Analysts covering the sector have also grown increasingly concerned about the possibility of a decline in demand in the event of a trade war initiated by the incoming administration down south.
“Tariffs are at the top of the Trump agenda, and we believe they represent potentially the most bearish market policy development for 2025,” RBC Capital Markets analyst Helima Croft said in a note on Thursday. “The headline tariffs on China in particular could soften Chinese demand and put downward pressure on prices.”
Still, Canada’s oil majors have been betting that oil and gas demand will remain resilient in the year ahead and prices will be supported by increased flows along TMX, the commercial start-up of LNG Canada and other opportunities for hikes in export capacity floated by Enbridge Inc. and others.
Stuath said it was difficult to come up with a definitive answer to the risk of tariffs without more detail or certainty over whether they’ll even come to fruition, but the company will focus on keeping its operational costs in check.
“We have built ourselves a resilient business here that is sustainable to take the ups and downs,” he said. “We saw those ups and downs happen through COVID, and if we happen to see that happen this coming year here, then we’ll be prepared.”
On Monday, Suncor Energy Inc. said it had generated record annual production in 2024 of 827,000 barrels per day, up more than 10 per cent from the previous year.
In its corporate guidance for 2025, Suncor said it plans to boost production by between 3.5 per cent and five per cent, with a capital expenditure budget of between $6.1 billion and $6.3 billion (down from $6.3 billion to $6.5 billion in 2024).
Cenovus Energy Inc. said it intends to boost production by around four per cent in 2025 to between 805,000 and 845,000 barrels of oil equivalent per day (boe/d), according to guidance released last month. The company said it plans to boost capital spending slightly to between $4.6 billion and $5 billion in 2025.
Imperial Oil Ltd. is also boosting production, forecasting between 433,000 and 456,000 boe/d, up around three per cent year over year.
Some mid-sized and smaller oilpatch companies are looking at even larger production increases in 2025.
Whitecap Resources Inc. chief executive Grant Fagerheim said his company is forecasting organic production per-share growth of about five per cent this year, but its internal target is closer to eight per cent to 10 per cent.
“The world needs more energy (and), quite frankly, I’m very optimistic and I feel very strongly about what Canada can provide, not just within our own country, but in continental North America and into the world,” he said.
Whitecap is forecasting that crude prices may be volatile, “but on balance robust” in 2025, particularly as a weak Canadian dollar tends to work to the benefit of exporters. The company’s price outlook shows crude averaging US$65 to US$75 per barrel, which amounts to a profitable $90 to $103 per barrel in Canadian dollars.
On the natural gas side, Canadian prices may remain weak this year, but Fagerheim said anticipated LNG development in British Columbia and growing power demand associated with data centres needed for artificial intelligence could act as catalysts for long-term growth.
Fagerheim said tariffs still top the list of risks to the sector, but said it’s unlikely that a tariff that makes life more expensive for Americans will last long.
“I’m in the camp that I don’t think tariffs will apply to oil and natural gas production, and if it does, I think it’s only until we get a change in our government,” he said.
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