Canadian Drilling to Drop 31%: PSAC
In the second update to its oilfield services activity forecast, the Petroleum Services Association of Canada (PSAC), which represents oil and gas service and supply companies, said April 30 only 3,100 wells will be drilled in Canada this year, down 31% from its original forecast in October 2019 of 4,500 wells.
Compared to 2019, 2020 will see a 37% drop in drilling activity, the new forecast shows.
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“Punishing blows continue to batter the health of this vital industry,” interim PSAC CEO Elizabeth Aquin said. “While 2020 began on a positive note, eroding investor confidence from protests and blockades of the Coastal GasLink Pipeline, cancellation of Teck’s Frontier oil sands project, and withdrawal of investment in the Énergie Saguenay LNG facility began to cast a shadow on the promising start.”
Demand destruction from measures implemented to contain the Covid-19 pandemic, combined with the “poorly-timed” Saudi-Russia price war, eventually dashed any remaining optimism for activity through the rest of this year, Aquin said.
“The result is over $7bn of capital investment cancelled from budgets to date, foretelling activity levels not seen in decades,” she said. Most of the impact will be felt on the oil side, and while gas will fare a little better, its smaller role in recent years will leave it well short of making up for the decline on the oil side.
“Additional measures to support the sector through this crisis are crucial,” PSAC chair Mark O’Byrne said. “The funding announced by the government of Canada for orphan and inactive wells for which PSAC advocated, was very welcome and has provided some relief to help retain jobs and expertise. But much more is needed given the severity of headwinds to keep this vital industry alive and ready to support Canada’s economic recovery.”
On a provincial basis, PSAC’s updated forecast calls for 1,570 wells to be drilled in Alberta, down 27% from the original forecast. An estimated 1,140 will be drilled in Saskatchewan, down 655, BC will see 260 wells, down 85, and Manitoba drilling will fall to 115 wells from 190.