Canada's oil industry may have hit peak investment.

In a grim report on the state of the oil industry, the Conference Board of Canada forecast that capital spending will decline by 20 per cent this year and may never recover to the high-water mark of $56-billion hit last year.

The industry can expect further cuts to capital spending well into next year and more layoffs, Mike Shaw, a Calgary-based economist with the not-for-profit research group, said in the report.

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He forecast the industry will post $3-billion in pretax losses in 2015, with much of the damage coming in the first three months as prices average below $50 (U.S.) a barrel and companies are booking restructuring cost related to layoffs.

"The first quarter is going to look pretty rough," Mr. Shaw said in a telephone interview

Canadian companies quickly cut billions from their investment plans after global crude prices plunged in the wake of the Organization of Petroleum Exporting Countries refusing to cut production levels late last year. "Consolidations and re-evaluations of spending plans will likely continue through 2015 and 2016," he said in the report.

The Conference Board said it expects the industry will see its revenue drop by 37 per cent this year and shed 8,000 direct jobs. In the oil sands, capital investment will decline to $25-billion (Canadian) from $30-billion last year.

However, Alberta Premier Jim Prentice said the long-term viability of the industry is not in doubt. "Absolutely not," he said when asked if investment had hit a peak.

"I wouldn't subscribe to that view."

Mr. Prentice noted that, even with today's low prices, the province expects to see crude production grow to between four to five million barrels a day by 2020, up from 2.9 million currently.

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"We are in the midst of a price war in the oil world," he said after speaking with delegates. "Over the next three years, we will be in a low-price cycle with obvious implications for the province, but this province remains strong and the strength and the viability of the energy industry remains strong."

Forecasting a difficult period of adjustment for Alberta's energy industry though to the end of 2017, Mr. Prentice said low energy prices provided a compelling case to diversify the province's economy.

"We have to deal with the reality that faces us," he said.

Alberta will release a budget on Thursday that is expected to slash spending and increase revenues, through actions such as higher health-care premiums, as it deals with a loss of oil revenues of more than $7-billion.

Crude prices surged on Wednesday, amid concerns about civil war in Yemen on Saudi Arabia's doorstep, and a falling U.S. dollar. North America's benchmark West Texas intermediate was up $1.70 – or 3.6 per cent – to $49.21 (U.S.) a barrel.

The Conference Board forecasts prices will rise gradually over the next couple of years, but will hit a "hard cap" of $80 a barrel, a level that will encourage American shale-oil companies to ramp up their production.

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Mr. Shaw agreed that oil sands production will continue to grow through 2019, due to the long-lead time of projects that were begun prior to the price collapse.

"Because of the nature of oil sands projects, we expect the impacts of the current drop in investments to stretch out over a number of years," he said in the report. Investment is expected to drop in 2015 and 2016 and grow only slowly between 2017 and 2019. Indeed, 2014 may prove to be the high-water mark for oil spending in Canada, he said.

Production will continue to grow but at a slower pace than expected as a host of companies have already delayed projects that would have come on stream in three to five years.

The sector is currently proceeding with expansions that will add 600,000 barrels a day of oil sands production within three years, and have spent too much money already to rein in those projects. With the new projects and ongoing improvements in existing facilities, the oil sands will see production grow to three million barrels a day by 2019, from 2.2 million last year.

Canadian companies will have to work to reduce their break-even thresholds in order to prosper at those price levels. The conference board notes that break-even costs for steam-assisted, gravity-drainage (SAGD) projects range from $60 a barrel to $80, while integrated mines requires prices above $90 to break even.