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Well heads at the McKay River Suncor oil sands in-situ operations near Fort McMurray, Alberta, September 17, 2014. In 1967 Suncor helped pioneer the commercial development of Canada's oil sands, one of the largest petroleum resource basins in the world. Picture taken September 17, 2014. REUTERS/Todd Korol REUTERS/Todd Korol

As prices of oil in the world market drop, so too will investment in the oil sands in Western Canada, the Canadian Association of Petroleum Producers said on Wednesday, forecasting a slash by as much as $23 billion from the capital spending of various oil firms.

In its mid-year update, CAPP said oil firms in Western Canada will most probably spend only $46 billion in 2015, compared to the $69 billion used in 2014. Production is, likewise, expected to go slower.

Output in 2015 is expected to grow to 3.6 million barrels a day, a jump of 150,000 barrels from 2014. However, CAPP president Tim McMillan stressed this was already adjusted just recently. In the group’s annual production outlook released in June 2014, it had forecast the rate of growth would have been 65,000 barrels a day higher in 2015.

CAPP also said to expect changes in 2016. Production will still improve in 2016, but lower by 120,000 barrels a day lower than what it had originally predicted for the year. McMillan explained the increase were brought by the “good investment projects in the last four or five years.”

CAPP said the total number of wells forecast to be drilled in 2015 in Western Canada will drop to 7,350 wells, or by 30 percent. McMillan said everything will be a ripple effect - "purchases will be down, including purchases from the more than 2,300 businesses from coast to coast, excluding Alberta, that sell goods and services directly to the oil sands. Investors have seen their portfolios shrink. Governments will see reduced revenues from the industry's royalty and tax payments."

However, the lower global oil prices and predicted slower production growth mustn’t hinder oil firms in Western Canada not to pursue directions and plans to build pipelines across North America. "No question, the effects on the industry are sharp but we continue to need all forms of transportation in all directions - pipelines in particular - as our industry continues to grow in the years ahead," McMillan said.

Crude prices managed to rebound on Wednesday, jumping US$1.31 a barrel to $47.78. Analysts, however, were quick to douse celebratory fireworks, warning prices could fall anew. In fact, global prices of crude oil aren’t expected to recover from the previous highs until the second half of the year.

Read more:

Canada’s Saving Grace Amid Falling Oil Prices Could Be Ontario

Falling Crude Oil Prices Force Canada To Go Easy On Spending Plans

Alberta Possibly Headed For Recession With Plunging Oil Prices, BoC Says Prices Could Go Lower, 'Bad For Canada'

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