Fig. 1. As Canadian producers pursue modest growth this year, the level of drilling will rise accordingly. Image: Horizon Drilling.
Global turmoil has continued to cast a pall over hopes for more peaceful times, with the Russian invasion of Ukraine now in its fifth year, and the war between the U.S./Israel and Iran surpassing six months, with no clear end in sight. In addition to enormous market uncertainty, the conflicts have also resulted in surging crude oil prices.
Projections of global demand are shifting almost daily, although recent International Energy Agency (IEA) oil demand projections point to an increase of about 850,000 bpd in 2026, driven by the recovery of non-OECD economies and an increase in petrochemical feedstock products, offset by a decline in demand for transport fuels. Meanwhile, in Alberta, benchmark natural gas prices continue to languish in the C$1.60-1.80 per gigajoule range. For many Canadian gas producers, the need for access to LNG markets in Asia is key to their long-term economic health. Meanwhile, oil producers are looking for modest growth this year, Fig. 1.
Tariff concerns. On top of these ongoing market challenges, the volume of tariffs imposed by U.S. President Donald Trump (Fig. 2), and the seemingly endless threats of imposing more, have further destabilized markets, increased prices for the average consumer (in the U.S. and abroad), and cast a pall over business planning for Canadian exporters, even if energy has largely remained unscathed by the economic weapon.
Fig. 2. The situation between U.S. President Donald Trump (pictured) and Canadian Prime Minister Mark Carney continues to be a concern for Canada’s oil producers. Image: The White House.
In August, the President backed down from threats to impose a sweeping 50% tariff on Canada by Aug. 19, as negotiations continued to renew the U.S.-Mexico-Canada trade agreement (USMCA). However, the trade talks collapsed yet again, and Trump’s administration levied a new round of tariffs on Aug. 22. And even though energy has not been a target to date, the constant threats directed toward Canada have created uncertainty that continues to inhibit growth and complicate corporate planning.
One positive result for Canada is that the constant threats have spurred the government and various industries to actively seek out economic diversification, in an effort to reduce the country’s reliance on the U.S. and its vulnerability to these sorts of punitive measures in the future.
For example, in July, 2026, Canada and the United Arab Emirates (UAE) signed a free trade agreement that could result in US$50 billion in investments by UAE in a number of Canadian markets, including energy. This follows several other trade initiatives established with China, India, and the Association of Southeast Asian Nations (ASEAN) this year.
Fig. 3. Canadian Prime Minister Mark Carney has made approval of the proposed West Coast Oil Pipeline dependant on industry committing to the Pathways project, which will capture greenhouse gases. Image: Official portrait.
Pipeline projects. Meanwhile, since the federal government launched the Calgary-based Major Projects Office (MPO) just over a year ago, the number of identified projects has expanded from five to 18, including two LNG projects in British Columbia, and more recently, the West Coast Oil Pipeline, proposed by the Government of Alberta, in partnership with Trans Mountain Corporation (TMC), Alberta Petroleum Marketing Commission (APMC), and Pembina Pipeline Corporation. Pembina’s economic interest through construction will be 10%, with the opportunity for up to an additional 10%, once the project enters commercial operation. TMC and APMC will own equal shares of the remainder.
The proposed 1.0-MMbpd pipeline would ship crude oil from the Bruderheim area of Alberta, where it will collect crude from various western Canadian pipelines, serving as a central hub where the product will be measured, stored, and then transported to a proposed marine terminal in southern B.C. The pipeline will predominantly follow the existing Trans Mountain corridor. The federal government has set a Sept. 18 deadline for public comment on the pipeline proposal.
Prime Minister Carney (Fig. 3) has said that project approval is also dependent on industry committing to the Pathways project, designed to capture 6 MM metric tonnes of greenhouse gases by the mid-2030s, and another 10 MM tonnes by 2045.
Pathways, a proposed CO2 transportation pipeline and storage hub for oil sands producers, is the cornerstone of a non-binding agreement signed in July by oil sands producers, Alberta, and Canada to increase Canadian oil production, further reducing Canadian dependance on the American market.
Questions remain about construction costs, carbon pricing mechanisms, and financial support from both governments. As oilsands output continues to increase, some producers have stated that future development plans are contingent on acceptance of a Pathways agreement by all parties, which is expected to occur by November 2026, and final market assessments by producers; a go/no-go decision is expected to be made by late 2027.
The policy shift at the federal government to a more rational approach toward energy and its importance to Canada’s future, plus the prospect of more pipeline capacity to the West Coast, have spurred optimism that investors may once again prioritize investment in the Canadian oil patch.
There have been some positive developments outside of the federal initiative, as well. The Alberta Utilities Commission has approved Canadian Utilities Limited’s $2.9-billion, 1.1-Bcfd natural gas infrastructure Yellowhead Pipeline, which is already fully contracted.
Fig. 4. Cenovus Energy expects to see first oil from its West White Rose platform and field by the end of the third quarter of 2026. Image: Cenovus Energy.
In B.C., construction has started on the $4-billion, 300-MMcfd Sunrise Pipeline expansion, on the Enbridge Inc. West Coast natural gas pipeline system. And FortisBC is proceeding with the $2-billion Phase 1B expansion of its Tilbury LNG facility in Delta, B.C.
Speculation continues that recent operational results from Alberta’s oil sands could renew interest in the massive deposits, but prospective proponents must also consider the status of shifting priorities within the federal government. Recent decisions, including Ottawa’s move to scrap its controversial electric vehicle mandate, which would have required EVs to account for a minimum 20% of auto sales in 2026, increasing to 100% in 2030, have also signaled that the federal Liberals are no longer actively opposing oil and gas development.
Offshore work. On Canada’s East Coast, operator and majority owner Cenovus is expecting to see first oil from the West White Rose Project late in the third quarter, Fig. 4. The project is an extension of the White Rose oil field, approximately 350 km east of Newfoundland and Labrador in the Jeanne d’Arc basin. It consists of a fixed drilling platform with a concrete gravity structure and integrated topsides facilities. The West White Rose platform will not store or refine oil, but transport it through subsea flowlines to the existing SeaRose FPSO. West White Rose is expected to produce 80,000 bpd and extend production from the field by 14 years.
Alternative energy. Different jurisdictions across Canada are also considering alternative energy sources, with dozens of proposed wind and solar projects currently proposed in B.C., Alberta, Ontario and Quebec. Geothermal, modular nuclear, helium, and hydrogen projects are also being considered across the country, although in most areas, the regulatory frameworks have not been fully developed at this time.
Given that Canada remains vulnerable to future economic measures by the U.S., there is keen interest in continuing to diversify energy sources and markets withing government and the business sector to reduce exposure to their mercurial southern neighbor.
Even with the uncertainty, oil production is projected to increase modestly in 2026, with oil sands remaining the dominantil sands reserves are estimated at 159 Bbbl to 165 Bbbl, ranking fourth globally
M&A activity. The volatile geopolitical environment has played havoc with commodity prices, which in turn makes it very difficult to set a value on potential acquisitions. In 2025, Canadian oil patch mergers and acquisitions activity reached C$31.2 billion up almost 61% over $19.4 billion in 2024, and the highest yearly total since 2017
This year, many observers have been predicting continued high M&A activity due to renewed interest in Canada from foreign investors. With one massive deal already in the books, 2026 should match or exceed last year. Notable deals this year include:
- In April, Shell Canada Limited announced plans to acquire ARC Resources Ltd. in a cash and share transaction for approximately C$22 billion, with final federal approval of the deal pending.
- In July, Greenfire Resources Ltd. acquired Connacher Oil and Gas Limited for approximately $1.277 billion in cash. Connacher is a private thermal oil sands company with a 100% operated interest in the Great Divide oil sands project.
- In May, Tamarack Valley Energy Ltd. sold its Charlie Lake assets for cash consideration of $804.0 million to an arm’s-length party.
- Also in May, Northern Oil and Gas, Inc. purchased a 25% interest in the light-oil Duvernay assets owned and operated by Parallax Energy Operating Inc. for C$350million (US$259 million).
Spending. With oil prices soaring, many companies are posting very strong second-quarter results, but spending has not grown at the same rate. Many companies are waiting for the inevitable drop in prices when the U.S./Iran war ends.
Overall, spending is up slightly over last year. Canadian Natural Resources Limited leads the way, with planned spending at C$6.9 billion this year, up approximately 3% over last year’s $6.7 billion. Suncor Energy plans to spend C$5.7 billion this year, down 1.7% from $5.8 billion in 2025; Cenovus Energy Inc. has increased its capital program to C$5.2 billion, up 7.3% from last year’s $4.8 billion.
Fig. 5. After a slow start, Canadian drilling during 2026 should exceed the 2025 well count by several percent. Image:
Other notables include Tourmaline Exploration Inc., which has reduced spending by more than 14%, to C$2.6 billion ($3 billion in 2025); Ovintiv Inc. has bumped spending 7% to $2.3billion ($2.15 in 2025); Imperial Oil Limited, up 5% at $2.1 billion ($2 billion in 2025), and Whitecap Resources Inc. up 2.5%, to just over $2 billion ($2 billion last year).
Land sales. Crown land sales in Western Canada rebounded nicely in the first half, to C$282.2 million, up more than 50% from $188 million in 2025. Alberta brought in just under $190 million, ($475.20 per hectare) increasing over 44% from $131.6 million ($491.93/ha) in 2025.
B.C. collected $54.5 million ($4,561.39/ha) in the first half, versus $31.83 million last year ($3,122.90/ha). Saskatchewan brought in $37.59 million ($565.57/ha), up almost 56% versus $24.15 million ($640.93/ha) in 2025. And Manitoba collected $197,000 ($281.02/ha), in the first half, compared to $422,000 ($118.42/ha), a decrease of 53%.
Drilling totals are down slightly, compared to 2025 mid-year totals, with 1,828 wells drilled in the first half, down 8.3% from 1,994 wells drilled last year, according to Daily Oil Bulletin records, Fig. 5. This included 1,223 wells drilled in Alberta, up 3.6% from 1,180 last year; 376 wells in Saskatchewan, down 38.3% from 520 in 2025; 177 wells drilled in British Columbia, a 22.9% increase from 144; 46 wells were completed in Manitoba, which had no recorded drilling in the previous two years, and six wells were completed in Newfoundland, compared to four in 2025.
World Oil survey results reflect a more optimistic viewpoint for 2026, with respondents indicating a 3.4% increase in drilling, to 5,740 wells. Meanwhile, the Canadian Association of Energy Contractors is sticking with its original December 2025 drilling forecast of 5,709 wells, an increase of 161 (2.9%) from 2025’s total (5,548).
Mr. Curran is a Calgary-based freelance writer.
- U.S. drilling eases higher in volatile market during second-half 2026 (August)
- International E&P still proves full of surprises (August)
- First Oil: The twists and turns of our new summer forecast (August)
- Drilling Advances: Auto-Driller vs Robo-Driller vs THE BORG (July)
- Energy NL’s Johnson sees renewed optimism for E&P offshore Newfoundland and Labrador after 10-year lull (July)
- First Oil: Renewed enthusiasm exuded in Canada and within IPAA (June)
- Subsea technology- Corrosion monitoring: From failure to success (February 2024)
- Applying ultra-deep LWD resistivity technology successfully in a SAGD operation (May 2019)
- Adoption of wireless intelligent completions advances (May 2019)
- Majors double down as takeaway crunch eases (April 2019)
- What’s new in well logging and formation evaluation (April 2019)
- Qualification of a 20,000-psi subsea BOP: A collaborative approach (February 2019)
