Canada’s oil and gas sector is drawing renewed interest from global dealmakers as the government adopts a more supportive stance and companies seek reserves and production growth away from conflict zones.

Shell’s proposed USD 16.4bn acquisition of Calgary, Alberta-based ARC Resources – the second-highest deal on record for a Canadian oil and gas target, according to Mergermarket data – underscores that renewed interest.The transaction will establish Shell as Canada’s third largest shale producer and reaffirms its position as the main liquified natural gas (LNG) exporter, Shell CEO Wael Sawan said on a 28 April investor call. “We establish Canada as a new low-cost heartland,” he said.

A key factor behind Canada’s renewed appeal is the federal government’s supportive posture toward the energy industry, including efforts to streamline the expansion of oil and gas infrastructure. This includes Shell’s existing LNG export terminal.

“The current government has changed the narrative somewhat,” Chris Carlsen, president and CEO of Canadian oil and gas company Birchcliff Energy, told this news service.

Mike Verney, executive vice president at reserve evaluation and auditing firm McDaniel & Associates, said recent alignment in messaging between officials in Ottawa and Alberta, which account for about 75% of Canada’s oil and gas total production – has also improved sentiment.

In November 2025, the federal and Alberta governments signed a memorandum of understanding outlining a framework for cooperation on energy development and export diversification. The agreement includes facilitating the development of a pipeline from Alberta to the British Columbia coast with capacity of up to 1m barrels per day.

This news service reported in February that Canada’s friendlier oil and gas policy was expected to boost M&A activity. While inbound deals still average around 13 transactions per year, deal volume has climbed steadily – from USD 3.8bn in 2022 to USD 19.4bn in 2025 – and has already reached USD 16.6bn year to date, largely due to Shell’s proposed acquisition of ARC, according to Mergermarket data.

Expansions to existing pipeline networks, most notably the Trans Mountain Pipeline Expansion (TMX) project, have narrowed the price differential between Western Canadian Select (WCS), the leading benchmark for Canadian heavy oil, and West Texas Intermediate (WTI).

The Alberta Energy Regulator estimates the WTI-WCS differential will average USD 13 per barrel from 2027 onward, compared with USD 18.65 in 2023, prior to TMX’s completion.

Shell has yet to make a final investment decision on the LNG Canada Phase 2 expansion, which would double the capacity of its LNG export facility to 28m tons per year from 14m. The project has been designated a “project of national interest” by the government’s newly created Major Projects Office.

“There is scope to redirect a substantial portion of gas volumes to higher priced Asian LNG markets, creating meaningful incremental value beyond current assumptions,” Sawan said on the investor call.

He also noted that ARC’s assets in the Montney shale basin, spanning northeastern British Columbia and northwestern Alberta, are just a 10-day sail away from Asia. While Shell’s interest in ARC predated the current conflict in the Middle East, access to Asian markets is a clear advantage. “With the challenges at the moment in the Middle East, many of our customers are looking for diversified supplies, and Canada is top of their list,” Sawan said.

Geopolitical tensions in Ukraine and Iran have underscored the importance of securing oil and gas inventory in safe jurisdictions, with Canada standing out as an obvious choice, said Dane Gregoris, managing director at Enverus Intelligence Research.

Unlike emerging opportunities in Argentina or Venezuela, Canada offers proven commercial production, established and expanding infrastructure, a deep services supply chain, and close proximity to the US, Verney said. “If you’re looking at energy security in five years, the opportunity in Canada is much greater.”

“There’s definitely more interest in Canada’s resource base,” agreed Birchcliff’s Carlsen.

Despite Shell’s headline-grabbing deal, US strategic and financial investors have accounted for most interest in Canadian assets. Density and degradation in the Permian basin are also an increasing concern among US producers, Verney said.

Alberta’s oil sands, in particular, provide a stable, long-life production profile that provides long-term inventory certainty, Gregoris said.“You look at Canada, you look at the performance of the assets and then you look at the undeveloped nature of it – that’s where you get quite excited about it,” Verney said. He added that US interest at the data-room stage has increased markedly, even if it has yet to translate into a wave of large transactions.

The US has been the most active inbound acquirer of Canadian oil and gas assets over the past six years, completing 44 deals worth USD 35.1bn, according to Mergermarket data. In 2025 alone, US buyers acquired six Canadian assets valued at USD 19.3bn, including Ovintiv’s USD 2.8bn acquisition of Calgary, Alberta-based NuVista Energy.

Ovintiv, which traces its origins to Canada, also bought Montney assets from Paramount Resources last year for USD 2.4bn.

The growing focus on the Montney is also lifting the appeal of smaller Canadian producers such as Birchcliff, which is leveraging existing infrastructure while strengthening its balance sheet. “There’s certainly a lot of recognition that the company is moving in the right direction,” Carlsen said.