Seldom has the outlook for engineering construction changed so quickly in such a short period of time.

Until mid year, despite severe labour shortages and concerns about the changes in Alberta’s royalty regime, the outlook for spending on energy-related engineering construction projects was very positive.

However, a significant number of major projects have now been put on hold, in light of sharply falling commodity prices, deteriorating investor confidence and tightening global credit conditions.

Alberta, which accounted for just over one-third of total engineering construction in 2008, is obviously hardest hit by this cutback in spending plans. According to a recent National Post article, an estimated $30 billion worth of oilsands-related projects have been put on hold and further cut-backs are expected.

Specific projects likely to be delayed over the near term include Shell’s $12-billion expansion of its Athabasca project and Petro Canada’s $10-billion Fort Hills upgrader project.

Despite the deteriorating outlook for some private-sector engineering projects, the outlook for investment in public-sector engineering projects remains firm for two important reasons.

First, the federal government and most provincial governments have recognized that a large percentage of the country’s infrastructure is well into middle age.

Second, the federal government and a majority of the provinces are in very good fiscal health, having run budget balances over the past few years. However, government revenues are likely to weaken over the next few quarters as both personal and corporate tax revenues decline.

Major public sector projects that should support engineering construction activity in 2009 include: (1) the recent increase in infrastructure spending outlined in the Québec Economic Statement on November 4, 2008; (2) Toronto’s planned Spadina subway extension; (3) continuing construction of Edmonton’s Anthony Henday Drive; and (4) the Sea-to-Sky highway upgrade in British Columbia.

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