The Petroleum Services Association of Canada (PSAC) recently presented a proposal to the federal government that they believe will put oil and gas services companies back to work while benefitting the environment.
“We asked the Government of Canada for $500 million in infrastructure funding for well decommissioning operations in Alberta that will create jobs, retain expertise and skills, and provide economic and environmental benefits,” said Mark Salkeld, the president and CEO of PSAC. “It’s a win-win for all stakeholders involved.”
He noted PSAC member companies typically do not ask for support from the government.
“They want competitive royalties, taxes and regulations so their customers – the exploration and production (E&P) companies – can continue the responsible development of Canada’s valuable oil and gas resources while contributing billions of dollars to Canada’s GDP (gross domestic product) every year,” he said.
Investment by E&P companies dropped 40 per cent in 2015, leading to drastically reduced activity levels, and more cuts are underway in 2016. The result is tens of thousands of oil and gas services workers have been laid off and many oilfield services companies already have or are in danger of closing down.
“That’s why it’s the perfect time to put our member companies and their people back to work while addressing a growing challenge,” he said.
As of January, Alberta had more than 75,000 inactive wells on record, requiring downhole wellbore abandonment and surface reclamation. Assuming the average cost per well for acceptable well decommissioning ranges between $100,000 and $300,000, then the investment for all current inactive or suspended wells could be at least $8 billion.
Current industry cash flow for 2016 is estimated at $26.5 billion, according to the ARC Financial Corp.
“While we absolutely agree well decommissioning is the responsibility of the licensee, generally E&P companies, economic circumstances and steadily increasing costs due to ever-improving regulations are causing this work to be delayed or postponed and regular activity has almost come to a standstill,” said Salkeld.
“Well decommissioning will help keep the expertise and intellectual capital that we have worked so hard to find and develop … so we’re prepared when the turnaround comes.”
PSAC says it is in the interests of all stakeholders to accelerate well decommissioning activity, especially during this challenging and possibly prolonged economic downturn, and federal and provincial governments are looking for infrastructure investments that will help stimulate the economy.
Helping to address this issue positively impacts the industry, the economy, employment, the environment and the quality of life for people in Alberta and Saskatchewan.
