In its first update to the 2018 Canadian Drilling Activity Forecast, released Jan. 31, the Petroleum Services Association of Canada (PSAC) has revised its forecasted number of wells drilled (rig released) across Canada for 2018 to 7,600 wells. This represents a decrease of 300 wells, or 4 percent, from PSAC’s original 2018 drilling forecast released in late October 2017.
British Columbia’s forecast is down substantially, Alberta’s is down slightly, while Saskatchewan and Manitoba are expected to see increases.
On a provincial basis for 2018, PSAC now estimates 3,807 wells to be drilled in Alberta, down from 3,998 wells in the original forecast. Approximately 29 percent less wells are expected to be drilled in British Columbia, with PSAC’s revised forecast now at 517 wells for the province down from 730 in the original forecast. The revised forecast for Saskatchewan now sits at 2,998 wells compared to 2,931 wells in the original forecast, and Manitoba is forecasted to see 265 wells or an increase of 35 in well count for 2018.
PSAC is basing its updated 2018 forecast on average natural gas prices of $1.75 CDN/mcf (AECO), crude oil prices of $55.00 USD/barrel (WTI) and the Canada-U.S. exchange rate averaging $0.79.
President and CEO of PSAC Mark Salkeld said, “Even with steady and stable increases in industry activity levels over the low points in 2015 and 2016, any improvements will continue to fluctuate due to the ongoing discount Canada realizes for its oil and gas versus world prices. As long as our products are essentially land locked and restricted to just one customer, a full recovery for activity levels for the Canadian oil and gas industry will be negatively impacted. Investment dollars are fleeing Canada for regions of the world offering a more competitive environment for investment and where there is greater confidence in getting projects approved and completed.”
Salkeld also said, “The same challenges remain with respect to prolonged downturns in trying to attract the necessary skilled labour force back to the oilfield services sector. As the sector has experienced in the past, it takes many years to recover from significant downturns and it will be the same again now.”
Salkeld added, “The cost savings exacted from the oilfield services sector over the last two and half years, as hard as they were to bear, have paid off in operations that today are far more efficient with newer technology which in turn changes the profile of the people needed in the sector along with the types of wells being completed for the producers. Canada will continue to see shifts from many wells drilled to fewer wells that are far deeper and more productive. PSAC will continue to forecast as accurately as possible in these technologically changing times. It is still the most exciting industry to be in.”
Salkeld said, “What Canada needs now, more than ever, is a world class LNG industry on both the west and east coasts. This, in conjunction with access to tide water for responsibly developed Canadian oil, will set the stage for Canada to be a significant global force in reducing GHGs around the world. There is no doubt that the world wants Canadian oil and gas; there is also no doubt that Canada is the best in the world at responsibly developing and producing oil and natural gas, in large part because of the innovation delivered by PSAC member companies and their employees. The services sector represents the front-line workers, Canada’s exceptional middle class that works hard every day to help advance technology through innovation and R&D, improve the efficiencies, protect the environment and reduce environmental footprint.”
On Feb. 5, PSAC put out a press release regarding British Columbia’s most recent efforts to stall the Kinder Morgan Trans Mountain Expansion pipeline project.
PSAC stated it is extremely disappointed and concerned that the Government of British Columbia has announced that it is proposing “a second phase of regulations to improve preparedness, response and recovery from potential spills” related to pipelines transporting liquid petroleum products.
PSAC noted over two years, stringent research and studies were conducted by the National Energy Board, the Canadian Energy Assessment Agency and the BC Environmental Assessment Office for the expansion of the Trans Mountain pipeline. The result of this rigorous process was to approve the expansion of Trans Mountain and to declare it to be in the national interest by the Government of Canada.
Further proposed study and regulations by the BC government can only be viewed as yet another tactic to deny to land-locked provinces, vital access to tidewater that BC freely enjoys and all while pursuing export opportunities for its own petroleum products, the release said. “This is not the time for inter-provincial trade wars as we pursue free trade agreements with the US and Asian countries,” said Salkeld, “Now is the time for the Government of Canada to uphold Canadian rule of law and our constitution.”
“Investment capital is already fleeing Canada due to competitive concerns. Lack of certainty for major project development and infrastructure will not help but only serve to drive away even more potential investment and with it Canadian jobs and economic prosperity,” continued Salkeld.
