Uncertain outlook for new pipelines poses an increased risk to oil and gas support sector

OTTAWA, June 17, 2013 /CNW/ - The long-term outlook for Canada's oil and gas support activities industry is threatened by the North America-wide debate over new pipeline construction, according to The Conference Board of Canada's Canadian Industrial Profile-Spring 2013.

This increased uncertainty could have negative effects across the economy, since the support industry is as big an employer as the oil and gas extraction sector itself.

"Investment intentions in the Canadian oil sands remain strong, which bodes well for the support industry's short-term outlook," said Michael Burt, Director, Industrial Economic Trends, The Conference Board of Canada. "However, the uncertainty over the Keystone XL and Northern Gateway projects could lead companies to pull back on their medium and long-term investment plans and limit future demand for support services."

In 2013, overall activity in the support services industry is expected to diminish for the second straight year. Lingering weakness in natural gas prices continues to suppress drilling activity, and conventional oil extraction is expected to level off this year after two years of increases.

Nevertheless, industry profits are forecast to rise to $250 million in 2013 thanks to solid growth in prices.

HIGHLIGHTS
  • The oil and gas support activities industry employed almost 112,000 in 2012, compared with 113,000 for the oil and gas extraction industry.
  • Investment intentions in the Canadian oil sands remain strong.
  • Professional services continues to benefit from healthy corporate profitability, numerous mergers and acquisitions, information technology changes and demand from the oil patch for services.

The Oil and Gas Support Activity Industry is one of six industries covered in the Canadian Industrial Profile - Spring 2013. Published by The Conference Board of Canada and the Business Development Bank of Canada, the Spring outlook also examines:

  • Professional Services - Increased corporate profitability and strong oil sands investment are driving demand for many professional services - such as legal, accounting, and engineering services. Industry profitability is expected to rise above $13 billion this year.
  • Textiles and Apparel - Production in the textiles and apparel industry continues on a long-term downward trajectory. Heavy international competition and weak sales will continue to limit industry profit margins—averaging less than 2 per cent over the five-year forecast period.
  • Electrical Equipment - Industry output is expected to decline for a second consecutive year, due to weak demand for electrical equipment, both at home and abroad. Production is expected to increase in 2014, but only moderate growth of 2 per cent per year is expected through the next four years.
  • Fabricated Metal Products - These products are primarily used by other manufacturing industries, such as motor vehicles and aerospace, so the optimistic outlooks for both these industries is a positive signal for fabricated metal manufacturers.
  • Machinery Manufacturing - After three years of strong growth, industry output is expected to suffer a setback in 2013, due in large part to impact of global economic uncertainty on commodity prices.

 

SOURCE Conference Board of Canada



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