Perhaps expectations were too high.
In its first update to the 2018 Canadian Drilling Activity Forecast, 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 – a decrease of 300 wells, or 4 per cent, from the original drilling forecast released in late October of last year.
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-US exchange rate averaging $0.79.
“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,” said PSAC President and CEO Mark Salkeld. “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, Salkeld pointed out, where there is greater confidence in getting projects approved and completed.
“The same challenges remain with respect to prolonged downturns in trying to attract the necessary skilled labour force back to the oilfield services sector,” said Salkeld. “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.”
“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,” said Salkeld. “PSAC will continue to forecast as accurately as possible in these technologically changing times. It is still the most exciting industry to be in.”
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 per cent 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.
“What Canada needs now, more than ever, is a world class LNG industry on both the west and east coasts,” said Salkeld. “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.”
(Petroleum Services Association of Canada)