Oil industry booming, but profits aren't staying in Alberta like they used to

The people of Fort McMurray in northeastern Alberta have seen their share of tough times over the last decade — a fire, a flood, COVID-19 and an oil crash. One restaurateur joked last year he hoped locusts weren't next.

But more than one year later, the oil and gas industry's fortunes have changed significantly, lifted by record profits. The situation has also buoyed the expectations of some of those who live in the community.

Owen Erskine, owner of Mitchell's Cafe in downtown Fort McMurray, said the community seems to be the first to experience the highs and lows of Alberta's boom-and-bust oil industry.

Today, he's seeing some encouraging signs — like Syncrude moving more employees downtown, and more municipal and provincial government employees present in the community.

"I think we're seeing a lot of optimism, of course, with oil and gas being our main sector up here," Erskine said.

Optimism is a welcome relief to residents of a community that has gone through many challenges, but what seems clear is that the oilpatch is not splashing around investment like it did amid previous oil booms.

Though companies have been reporting record profits this year, the proportion of oil and gas reinvestments back into the Alberta economy are a fraction of what they were at the time of the last boom.

The ARC Energy Research Institute, which models the entire western Canadian sedimentary basin, projects the industry will produce $250 billion of revenue this year, almost two times the typical level seen over the past decade on average.

Almost all cash flow used to go back into capital spending, said Jackie Forrest, executive director of ARC. Today, only one third is going back.

"So [capital expenditures] is a fairly small number here. We're expecting about $42 billion of capital spending this year, which is really down relative to the average over the last 10 years," she said, adding that over the past decade a typical level might have been $60 or $70 billion.

Even in communities where oil and gas activity is picking up, trepidation about the future remains. Jason Schneider, the reeve of Vulcan County, located southeast of Calgary, said the area sits on some established oil and gas fields, and people are busy again there.

"Definitely everybody's being a little hesitant and pretty cautious this time around, because I think they're just kind of trying to use what they currently have," he said. 

"But as far as new investment, we're not really seeing much in this part of the province."

The Canadian Association of Petroleum Producers (CAPP) said industry had generated an estimated $35 billion to $40 billion in domestic capital investment this year.