Low oil and natural gas prices are having a negative impact on the industry in Western Canada, leading to a decrease in drilling activity that is expected to continue into 2026. North American oil prices are currently below $60 US per barrel, down from over $80 in January. In response to this, oil and gas companies are reducing costs, with total capital spending projected to decrease by 5.6% this year and an additional 2.2% in 2026, according to a recent report from Enserva, a Calgary-based organization representing oilfield service companies.
The report indicates that the total number of wells drilled in 2025 is anticipated to drop by nine percent compared to the previous year, including a significant 16% decline in British Columbia. In Alberta, drilling activity is set to decline by seven percent this year, with a further 10% decrease expected in Saskatchewan. Both provinces are forecasted to see a four percent drop in drilling in 2026.
Canadian natural gas prices have also faced challenges, including a period in September when prices fell below zero, leading some companies to halt production to avoid giving away gas for free. Despite these difficulties, Canada recently started exporting natural gas off the coast of British Columbia with the launch of LNG Canada operations, alongside several other LNG projects in progress.
Enserva’s CEO, Gurpreet Lail, acknowledged the industry’s current challenges but expressed optimism regarding the long-term prospects, particularly for natural gas, citing the potential benefits for Canadian producers with the increasing global demand once short-term pressures ease.
The Enserva report paints a bleak outlook for the oil and gas sector in the coming years, as major forecasting agencies do not anticipate a recovery in oil prices 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, according to the report.
Upcoming announcements by Prime Minister Mark Carney and Alberta Premier Danielle Smith are expected to include an agreement in Calgary that would provide special exemptions for the province from federal environmental regulations and offer political backing for a new oil pipeline to the British Columbia coast.