Oil and gas producers should expect to pay more for services as activity picks up, says Mark Salkeld, CEO of the Petroleum Services Association of Canada (PSAC), which released a “cautiously optimistic” update to its 2017 drilling forecast on Monday.
“The cost savings exacted from the services sector over the last two and half years are not sustainable, but that will be corrected as activity and the demand for people and equipment increases,” Salkeld said in a statement.
PSAC is now projecting that 975 more wells will be drilled in Canada in 2017, the vast majority in Alberta.
That’s a change from PSAC’s November forecast for 2017, where Saskatchewan was expected to see the most drilling activity.
The new projection of 5,150 wells includes a jump of 806 wells in Alberta, to 2,706 from 1,900.
In Saskatchewan, 1,985 wells are expected, up from 1,940; in B.C., 367 compared to 280 in the original forecast; and in Manitoba 73, up from 50.
“Some of the Canadian oilfield service, supply and manufacturing sector are realizing some uptick in activity as oil prices recover and operators increase their drilling programs,” Salkeld said.
“With luck and the favorable policies from governments in Alberta, Ottawa and Washington DC with respect to the new royalty regime and pipeline approvals, the Canadian oilfield services sector will pick itself up, dust itself off and get people and equipment back to work.”
The numbers may be up from the 2016 final forecast of 3,950, but they are still not anywhere near pre-downturn levels. PSAC forecasted 5,320 wells in the midst of the downturn in 2015, which compares to 10,930 wells in 2014 and 11,475 in 2013.
“It took us many years to recover from a similar but less impactful downturn in the early 80s and it will be the same again now,” Salkeld said.