A new report from Deloitte says that the build in light oil pricing in recent months has spurred more oil-focused drilling in Canada, helping to offset reductions in rigs targeting natural gas.
But the opportunity is limited without new pipeline capacity as light oil light oil suffers similar pricing discounts as those being experienced by heavy crude producers.
“Canadian light crude prices have also taken a hit over the summer as Edmonton light differentials swelled to over C$20/bbl,” Deloitte said in its Q3/2018 price forecast.
“The extreme differentials and lack of major projects on the horizon indicate that market optimism for Canadian crude has declined over the past few months as infrastructure projects continue to remain in limbo and transportation capacity issues remain unresolved.”
There were just under 200 active rigs in the third quarter, about two-thirds of which drilled for oil and one-third drilled for gas, Deloitte said. Similarly, there were about 200 rigs in the field at the same time last year, but activity was split more evenly between oil and gas.
The relatively steady news is just “okay” for Canada’s oilfield service and supply companies, says Deloitte partner Andrew Botterill.
“The problem is that drilling rigs are up in the U.S,” he told JWN.
“That’s a sign that U.S. prices, which are firmer than Canadian prices, are bringing forward lots of opportunity and companies are running out and drilling. On the Canadian side, companies are a little bit more focused on maintaining production; they’re not feeling as confident on the long term prices…Service companies down in the U.S. are excited and seeing growth and I think in Canada they are wishing it was more of the same.”