The Petroleum Services Association of Canada (PSAC) has for a third time increased its drilling forecast for western Canada this year.
PSAC is now projecting a 72 percent increase in wells drilled compared to its original forecast issued in November of 2016, from 4,175 to 7,200. It had previously increased the forecast to 5,150 in January and then 6,680 in April.
That's compared to 10,930 wells in 2014 and 11,475 in 2013, but up from 3,315 for 2016.
The increase is being credited to “the relatively quick impact of the transfer of investment out of the oilsands into the conventional sector and, more specifically, towards liquid rich natural gas and light tight oil which ultimately provide a faster return on investment dollars than the longer-term investment oilsands projects,” according to a statement from PSAC president Mark Salkeld.
“This investment shift played an important role in taking a rig count from what we thought would be closer to 200 active rigs to well over 300 in Q1-2017.”
PSAC based its updated forecast on average natural gas prices of $2.75 CDN/mcf (AECO), crude oil prices of US$49.00/barrel (WTI) and the Canada-US exchange rate averaging $0.77.
Salkeld added that while producers are still benefiting from the dramatic cost reduction demands placed on service suppliers over the last few years, it’s not a good long-term strategy for the Canadian market.
“The very unsophisticated and borderline archaic supply chain and collaboration relationships in Canada do not support a model for continuous improvement,” he said. “Slim services sector margins mean less funds available for new R&D and innovation. Only those players with deep pockets can continue to develop leading edge technologies and process solutions.”
Finally, Salkeld said that Canada continues to struggle with its place in the world of energy supply given its lack of access to tidewater and public support for infrastructure.
“The decision last week by Petronas to abandon the Pacific NorthWest LNG project in BC is yet another sign that investors see better opportunities for their capital elsewhere. What a shame given our abundant natural resources, our robust regulations and responsible development that could help the rest of the world lower their GHG emissions.”