PSAC Lowers Drilling Forecast Again
The Petroleum Services Association of Canada (PSAC) has lowered its forecast for the number of wells to be drilled (rig released) across Canada for the third time this year.
PSAC chief executive officer Gary Mar said the projected total number of wells drilled is lower by 31 per cent, levels not seen since the lows of 2015 and 2016 at the onset of the downturn.
PSAC projects there will be 5,100 wells drilled (rig released), down from 5,300 as predicted in May 2019 basing its updated 2019 forecast on average natural gas prices of C$1.60/mcf (AECO), crude oil prices of US$57/bbl (WTI) and the Canada-U.S. exchange rate averaging $0.76.
Mar said it is clear the industry continues to face challenges for a healthy recovery. The Trans Mountain pipeline expansion approval for a second time has not restored investor confidence in Canada.
“Concerns remain that it will be built in a timely fashion to open market access beyond the U.S., and with the passage of Bills C-69 and C-48 by the federal government, support for this industry at all in Canada is in question. For the first time in Canada, sovereign risk is an issue,” he said.
On a provincial basis for 2019, PSAC now projects 2,425 wells to be drilled in Alberta, down from 3,532 wells in the original forecast.
The revised forecast for Saskatchewan now sits at 2,035 wells compared to 2,422 wells in the original forecast, and Manitoba is forecasted to see 230 wells or a decline of 25 in well count for 2019. Approximately three per cent more wells are expected to be drilled in British Columbia, with PSAC’s revised forecast now at 395 wells, up from 382 in the original forecast.
“On the provincial front in Alberta, while optimism is evident with a new government in office, curtailment of oil production remains in place and continues to be a factor against new investment,” said Mar. “Across both Alberta and B.C., gas production is also hampered by low prices, again from lack of market access beyond the U.S. until LNG Canada is in service.”
Mar said the result of these challenges is that capital, companies, equipment and crews are leaving Canada for better opportunities, with the U.S. an easy choice as it forges full-speed ahead with a supportive government and a welcoming and competitive business environment.
“Having only one customer for our oil and natural gas has not been a good strategy for Canada,” said Mar. “Canadians are losing out on jobs and $15 billion to $25 billion per year in lost revenue that could be used for social programs such as health care, education and roads as well as for R&D and innovation.”
- Oilfield Services