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Canada’s Oil Extraction to Decrease in 2007

Apparently oil prices are going down and that will in turn lower the profits of Canada’s oil extraction industry by almost 30 per cent this year, although thankfully for all fat oil execs profits will expected to remain high, at least that’s what the Conference Board’s Canadian
Industrial Outlook: Canada’s Oil Extraction Industry-Winter 2007 said.
Oil extraction industry profits grew by 26.4 per cent in 2006, reaching a record $15 billion. In line with lower oil prices, profits this year are expected to decline, but at $10.6 billion they will still be high by historical standards. Gains in production and improvements in productivity will allow profits to increase again starting in 2008.

Following an increase of just over five per cent last year, oil production in Canada is expected to rise by about 10 per cent in 2007. Production growth will remain strong in the coming years thanks to ongoing development of Canada’s oilsands resources.

Labour and material shortages in Alberta are causing concern about costs for energy companies. Fierce competition for both labour and materials increased the costs of extracting crude oil by 10.4 per cent in 2006. Reduced exploration activity related to lower oil prices means that total costs for the industry are expected to decline by 3.3 per cent in 2007, but the decline
in revenues will be much larger.

This is the first release of the Conference Board’s new Canadian Industrial Outlook: Canada’s Oil Extraction Industry. The content for this report used to be included in the Board’s broader oil and gas industry report. Canadian Industrial Outlook: Canada’s Oil Extraction Industry will be
published twice a year.

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