Vital signs: Budgets struggle to recover in teeth of Kyoto stream

Difficulties experienced by oil and gas companies in establishing their 2003 budgets due to the uncertainty surrounding the impact of Canada's ratification of the Kyoto Protocol are discussed. Only Shell Canada and Petro-Canada set their capital budgets by early December, an exercise that traditionally is wrapped up by early autumn. Nevertheless, for 2003 industry analysts anticipate a modest increase in industry capital expenditures to about $25 billion, up from $23.5 billion in 2002. Petro-Canada forecasts a substantial increase in its capital spending (to $2.6 billion) in its pursuit of growth at home and abroad, as is EnCana Corp., which anticipates spending a staggering $5 billion with 70 per cent earmarked for conventional onshore activities, the remainder for offshore and international initiatives. On the opposite end, Shell Canada set its capital and exploration budget at $810 million, about $1 billion less than in 2002, reflecting the completion of the Athabasca Oil Sands Project. Despite the dip in spending this year, Shell Canada nevertheless is maintaining an aggressive five-year plan that will see planned capital and exploration expenditures of some $3.4 billion, of which $1.2 billion is earmarked to move East Coast and Mackenzie Delta frontier opportunities forward. Overall, this year's modest increase in projected industry expenditures is seen as a welcome rebound from 2002, when the events of September 11, 2001, shook the political and economic foundations of the western world, causing total industry spending to fall from a record $27.7 billion in 2001. The most visible sign of industry's restraint in 2002 was at the land sale table, where sales were only half those generated in 2001