Low oil and natural gas prices are impacting the industry by causing a decline in drilling activity in Western Canada, with expectations for further decreases in 2026. North American oil prices are lingering below $60 US per barrel, down from over $80 in January. This has led oil and gas companies to reduce costs, with total capital spending projected to decrease by 5.6% this year and an additional 2.2% in 2026, as per a recent industry report from Enserva, a Calgary-based organization representing oilpatch service companies.
The report forecasts a nine percent decrease in the total number of wells drilled in 2025 compared to the previous year, with British Columbia expected to see a significant 16% drop. In Alberta, drilling activity is anticipated to decline by seven percent this year, while Saskatchewan is expected to experience a 10% decrease. Both provinces are projected to see a further four percent reduction in drilling in 2026.
Additionally, Canadian natural gas prices have faced challenges, including a period in September when prices fell below zero, prompting some companies to halt production to avoid giving gas away for free. On a positive note, Canada has started exporting natural gas off the B.C. coast this year, with LNG Canada commencing operations. Several other LNG projects are either in development or under construction.
Gurpreet Lail, CEO of Enserva, acknowledged the industry’s current adjustments, highlighting the positive long-term outlook for natural gas despite near-term challenges. The report indicates a prolonged downturn for the oilpatch, with major forecasting agencies not expecting oil prices to rebound before 2029 compared to 2024 levels. Job cuts in the oil and gas service sector began earlier this year and are expected to persist through 2025, remaining stable in 2026.
Prime Minister Mark Carney and Alberta Premier Danielle Smith are set to announce an agreement in Calgary that would grant the province special exemptions from federal environmental regulations and provide political backing for a new oil pipeline to the B.C. coast.