Nearly one-third fewer petroleum wells will be drilled in Canada this year compared to 2018, according to an industry association.
The Petroleum Services Association of Canada (PSAC), in its third update to its 2019 Canadian Drilling Activity Forecast, is again decreasing its forecasted number of wells to be drilled across Canada for 2019 from 5,300 (May 2019 revision) to 5,100 wells drilled.
It said it based its updated 2019 forecast on average natural gas prices of $1.60 CDN/Mcf (AECO), crude oil prices of US$57.00/barrel (WTI) and the Canada-US exchange rate averaging $0.76.
“Compared to last year, the total number of wells expected to be drilled is lower by a 31 per cent. These are levels not seen since the lows of 2015 and 2016 at the onset of the downturn,” PSAC president and CEO Gary Mar said in a statement. “It is clear that our industry continues to face challenges for a healthy recovery.
Mar said even the Trans-Mountain Pipeline expansion approval following its purchase by the Government of Canada 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.
“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. 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.
“The result of these challenges is that capital, companies, equipment and crews are leaving Canada for better opportunities, with the US 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. Canadians are losing out on jobs and $15-25 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.”
Provincially, PSAC 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, it said.