Copyright of the Daily Oil Bulletin 2017
Drilling Expected To Be Flat Over Next Year
Vancouver — Oil and gas drilling activity is expected to remain flat over the next year, says the president of the Petroleum Services Association of Canada (PSAC).
“At this point in time, we’re not seeing any strong indicators of more [activity] than what we’re experiencing right now,” Mark Salkeld said in an interview Monday after speaking to the Greater Vancouver Board of Trade.
PSAC is preparing to release its annual forecast around the end of this month. The organization, which represents 170 oilfield services companies and approximately 35,000 of their employees, revised its 2017 forecast upwards twice.
Salkeld indicated the forecasted activity level will be realized. But with oil prices languishing around $50 per bbl, “there is nothing to indicate a boom.”
“We’re on our way to having 6,000-some-odd wells in Western Canada drilled this year,” he said. “We’re busy. Right now, there’s 50 per cent more wells working this year than there was last year, so we are more active.”
Salkeld stressed that PSAC is emphasizing such metrics as days on the well and metres drilled rather than well counts, because service firms’ productivity is “just skyrocketing” due to innovation and revised market conditions.
“We’re drilling less wells,” said Salkeld. “It’s not so much the number of holes in the ground or rigs working, because the wells we’re drilling are these longer and lateral sections — long horizontal well bores with multi-stage hydraulic fracturing — so we’re giving our customers the equivalent production of eight wells on a one-well-bore sort of thing. So there’s a lot more to [the current situation], and we may never get back to 10,000 or 12,000 wells a year, but we’ll get to 8,000.”
But it remains to be seen whether PSAC members, who turned down work from producers in the first quarter of 2017 due to employee shortages, will have enough skilled workers now and in the future. Although hiring levels have increased, said Salkeld, service firms are still finding it difficult to fill jobs because experienced workers who left — mainly due to layoffs — have lost trust in the energy sector’s long-term employment prospects.
Consequently, PSAC has launched a new service, PSAC Connect, to help companies recruit and retain employees while also informing the sector about employment trends.
“We’ve been working all spring, summer and fall to hire,” said Salkeld.
During a panel discussion with other industry leaders, Salkeld, who entered the energy sector as a heavy-duty mechanic, noted the increasing use of robotics, artificial intelligence and other advanced technologies will also pose a greater need for workers with different skills.
“When I started on the rigs, if I had a hard hat and a heartbeat, I was hired,” said Salkeld. “But now, [the industry] is beyond that. … You need talent, you need skill, so it’s not just [a matter of] hiring anybody off the street that’s looking for work.”
Meanwhile, Salkeld said Energy East’s cancellation, by continuing the Canadian sector’s reliance on oil exports to the U.S., will have a long-term, although not immediate, effect on future generations of PSAC members — and all Canadians.
“The last thing we want is to be an importer of product because we can’t get our own out of the ground and to other customers,” said Salkeld, alluding to the fact that eastern Canadian markets import oil to meet current demand.
“I think it’s a $48-million-a-day gift we’re giving to the U.S., [which] is what they’re getting from our discounted oil and gas out of Canada,” he said. “That’s not a way to do business. We need other customers to help balance that.”
Canada, he added, also needs a strategic energy development plan because the industry is in “a real mess” when it comes to securing investment and getting projects approved.
As Energy East’s cancellation created a sombre tone, Salkeld and other panelists touted the fact that Canada with its strict regulatory regime and carbon pricing structure, is a more responsible producer than countries, such as Saudi Arabia, Algeria, Nigeria, from which it now must import oil.
“Canada will never [be] an energy superpower,” said Salkeld. “We’re not going to be a Russia or a United States, but we could be a good player in getting our product offshore, because if you want to lower [greenhouse-gas emissions], it’s [about] getting our product offshore into countries like India and China that would love to have it. India and China are increasing demand for [it]. To not be that responsible player on the global stage with the best oil and gas in the world is just … stupid. It’s just very frustrating.”
Wally Kozak, Calfrac Well Services Ltd.’s director of industry and government relations, said Canada squandered its chance to build an alternative to Keystone XL while its American leg’s approval was delayed under the former U.S. government.
“Delays in the National Energy Board [approval] process led us to grasping defeat from the jaws of victory,” he said.
Salkeld said Keystone’s recent approval helps PSAC members; however, any benefits will be offset by Energy East’s cancellation.
“We’re giving [the U.S.] raw product, they’re taking it to the Gulf [of Mexico], they’re refining it and they’re actually selling the finished product back to us for more money,” he said during the interview. “It’s ridiculous. We should be doing better. We should be an independent producer with our own customers. One main customer is now our competitor, and we need to develop our customer base, and that’s [by getting] pipelines to tidewater.”
To achieve that goal, said Dick Brown, president and CEO of LNG-distribution firm Ferus, the Canadian energy sector must show that it deploys the world’s safest, cleanest and most socially responsible practices.
“We need to get that message out, not just to the world but, first and foremost, to us as Canadians, who actually hold the Crown resources,” said Brown.
But with people “less divorced” from energy sources than they were in the past, the industry must tell its story in a different manner, said Calfrac’s Kozak.
“The world has changed, and we are changing behind it, unfortunately, in the way we communicate as an industry,” he said.