The Petroleum Services Association of Canada (PSAC) anticipates increased activity across all oilfield service lines in 2022, with top brass highlighting an increase in site rehabilitation work.

“What’s otherwise known as ‘closure work’ will play a huge role, especially with the funding from the feds,” said Gurpreet Lail, president and chief executive officer. The deadline to complete federally-funded rehabilitation work is year-end 2022, she told the Bulletin, and so a lot of work will be taking place in the upcoming months, which will have an impact on overall OFS activity. “I think that’ll be a differentiating factor.”

Late last year, PSAC released its 2022 Canadian oilfield services activity forecast, which called for 5,400 wells (rig releases) to be drilled during this year. In Alberta, the associated forecasted 3,125 wells rig released, representing a year-over-year increase of 450. For Saskatchewan, PSAC forecasted 1,495 wells in 2022, which is up 198 wells from 2021. For B.C., the association forecasted 605 wells for this year, which is up by 79 year-over-year.

“I don’t think there’s anything that’s changing right now,” Lail said of the forecast. However, she added, factors that could change the forecast include current labour shortages. “It’s getting mitigated a little bit, but there are still major labour issues going on. That has some potential to impact our sector.”

Rystad Energy AS anticipates overall oilfield services demand in Canada will grow by nine per cent in 2022, reaching US$36.6 billion, according to Binny Bagga, vice-president of energy service research.

“We observe that [for] large Canadian public oil and gas companies reporting guidance of 2022, many have increased capex spend year over year by 15-20 per cent on optimistic oil and gas prices,” she said. “In the shale segment, we expect significant growth in both drilling and completion year-on-year.”

Rystad forecasts drilling and completions activity will increase by 19 and 12 per cent, respectively, for 2022 when compared to 2021, Bagga told the DOB. The drilled-but-uncompleted (DUC) inventory levels reached historical lows in November 2021 on back of robust completion activity, she said, signalling a greater call of drilling activity in 2022.

“We have also observed that several rigs have moved across [the] U.S. border into Canada in 2021 — a rare occurrence that may need to continue into 2022 to meet the growing demand.”

From a global perspective, along with a recovery in the oil prices last year was the ramping up of drilling activity, with close to 60,000 wells drilled worldwide in 2021, said Erik Vinje, an analyst in energy service research, land rig solution, for Rystad. The energy research and business intelligence firm anticipates this recovery to continue in 2022.

However, Vinje told a recent Rystad webinar, while this year likely will see more than 60,000 wells drilled, there will be a downward trend in worldwide activity starting next year, due mainly to longer-term projections on future oil demand, as well as the base-case oil-price forecast, which Rystad sees reaching the low of $47 per bbl in 2024.

Fortunately, for Canada, Rystad anticipates Canadian hydraulic horsepower demand will rise through to 2025. Demand for oilfield services should drive service prices higher, said Bagga, passing on the costs to the operators in 2022. “Many operators are baking in service price inflation for oilfield services this year on higher capex spend.”

Also, she suggested, a positive drilling-and-completions outlook is resulting in a “wave of investment” into the Canadian proppant space on rising proppant frack sand demand.

In general, Lail noted, she is optimistic about the future of OFS and the energy sector, and the role to be played in the global energy environment and transition. “Canada has vast resources, and we have a responsibility to extract those energy resources, and we have the technological knowhow to help the world address pollution and energy poverty.”

She added: “We’re a resource-rich country, and we really need to start [saying] that message not only to the Canadian public, but across the nation and internationally.”

Capital spending in 2022

The Canadian Association of Petroleum Producers (CAPP) is forecasting a 22-per-cent increase in natural gas and oil investment in 2022, reaching C$32.8 billion, compared to an estimated investment of $26.9 billion in 2021.

Alberta will lead all provinces with its upstream investment increasing 24 per cent to total $24.5 billion in 2022, says CAPP. More than 80 per cent of new spending will be focused in Alberta, and this represents an additional $4.8 billion of investment into the province compared to last year.

In terms of OFS companies, SECURE Energy Services Inc. (for example) expects its 2022 sustaining capital spending to reach about $40 million, according to the company’s Q3 results, while more sustaining capital related to landfill expansions comes to roughly $15 million, which assumes growth from industry activity levels. CWC Energy Services Corp. has outlined a 2022 capital expenditure budget of $9.9 million.

Meanwhile, PHX Energy Services Corp. has lifted its 2022 capital plan by $10 million, with the company anticipating $40 million in capital expenditures for this year.

For its part, in November, the Canadian Association of Energy Contractors (CAOEC) forecast 6,457 wells will be drilled in 2022, which represents a 1,363-well increase from the association’s anticipated 2021 tally. The CAOEC expects 58,111 operating days in 2022, which is up 27 per cent from 2021.

Rig utilization (worldwide)

Globally speaking, Vinje said, Rystad estimates drilling fleet utilization was just above 65 per cent before COVID-19, and then this dropped to around 48 per cent in 2020. These rig utilization numbers then climbed above 50 per cent last year, both due to an uptick in the drilling demand, but also due to rigs simply being removed from the market.

“There are, of course, many strategies these contractors can use and apply in order to combat these bad numbers we see here. One of the most effective and well-known strategies is of course to diversify. There are many ways they can diversify, but one of the most important is to diversify and expand into new regions.”

He added: “What we’ve seen in the land rig market is that organic growth has been extremely difficult, and we’ve therefore seen acquisitions and joint-ventures as a popular strategy for entering into these new markets over the years.”

With 8,000 rigs in the worldwide market, Rystad anticipates utilization levels to remain modest, and competition in the market to be “very tough” going forward as well, noted Vinje. Therefore, he said, there is a growing interest among contractors to expand into new and emerging services, such as geothermal. “We’ve also seen this sector gain a lot more popularity among the energy companies as well, in order to pursue new avenues to reduce their emissions.”

The worldwide geothermal market is becoming a “multibillion-dollar market for well-service players,” he told the webinar. He suggested that industry needs to add around 700 wells and US$3.5 billion in well spending each year up to 2030 towards these geothermal power-generation projects in order to meet countries’ environmental goals.

According to Lail, PSAC member firms are “continuing to evolve” as industry adapts and changes to be a part of things like geothermal in the energy transformation. “The amount of innovation and technology coming out is huge.”

PSAC’s plans

This year marks the 40th anniversary of PSAC, noted Lail, with the association itself anticipating “transformative change” in 2022, pursuing opportunities “to find strategic pathways for new collaborations” for its members.

“We’re aiming to expand our high-value programs and supports, continuing to build knowledge, networks and connections with subject-matter experts who will help our membership further. We’re exploring new opportunities to welcome other Canadian energy service organizations, making it a more inclusive association.”

She added: “On the flipside, we’re streamlining some things. You’re going to see some new things coming from PSAC — in terms of a new look and feel — in the coming weeks. There’ll be some announcements made towards the end of this month.”