EDC sees rebound in Alberta energy exports

‘Light at the end of the tunnel’

OTTAWA • Despite a drastic drop in energy prices, and its knock-down effect on export earnings, companies in Alberta’s oilsands could still rebound next year as the cost of crude begins to climb back up.

That’s a scenario Canadian companies are likely counting on, but one that depends on a number of pieces falling together.

“This will be a difficult year for Alberta exports, but there is light at the end of the tunnel,” said Peter Hall, chief economist at Export Development Canada.

“The continued revival of the global economy, driven by U.S. growth, and the anticipated rise in oil prices back to the $70-per-barrel level will fuel the expected turn-around next year.”

So far, however, this year has been a major disappointment for the oil patch — given that crude now trading just below US$60 a barrel, off its lows but still only about half its value of a year ago.

In a report Wednesday, the EDC forecast the plunge in both oil and gas prices will cut Alberta’s total export earnings in 2015 by 17 per cent.

Petroleum exports, alone, will tumble 25 per cent this year, while natural gas exports will slide 23 per cent, “which is significant for an economy that depends on energy for nearly 75 per cent of its export revenue,” the federal financing and insurance agency said.

But a partial price recovery and an increase in the volume of shipments could actually lift Alberta’s total exports next year by as much as 19 per cent, the agency said.

“The energy sector is expected to bounce back with 27 per cent growth in 2016,” it said. “Natural gas will stage a significant, yet less dramatic, comeback with nine per cent growth in 2016, due largely in part to increased shale gas capacity in the U.S.”

The energy sector aside, the EDC’s export outlook remains positive for many of Alberta’s other industries — much, of course, will be dependent on the strength of the U.S. economy and growth in other export markets.

Agriculture, machinery and equipment, and chemicals and plastics will collectively post export growth of seven per cent in 2015, followed by a three-per-cent rise in 2016.

Separately, exports of agri-products are estimated to expand seven per cent this year and then slow to one per cent in 2016, with some countries possibly trimming purchases due to recent concerns over bovine spongiform encephalopathy, or “Mad Cow Disease.”

Chemical and plastics shipments are forecast to grow five per cent in 2015 and three per cent next year, while machinery and equipment exports will rise 10 per cent this year and five per cent in 2016 — although both sectors are also dependent on the pace of the U.S. recovery.

“Energy receives all the headlines, but it’s great to see positive growth in other sectors,” Hall said.

“Diversification is an important insulator, one that can protect an economy against seismic shifts in any one sector of the economy, like we’re seeing right now with energy,” he said. “Alberta will always be about oil and gas, but it helps to develop strength in other sectors that can fill in when commodity prices are down.”