The Petroleum Services Association of Canada has reduced its 2019 drilling activity forecast for the third time since it was released last November.
PSAC now expects 5,100 wells to be drilled in Alberta, B.C., Saskatchewan and Manitoba, a reduction of approximately 23 percent from its original forecast of 6,600 wells for the year.
Compared to last year, the total number of wells expected to be drilled is lower by 31 percent, PSAC CEO Gary Mar said in a statement.
PSAC says that Canadians are losing out on jobs and $15 billion to $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.
“These are levels not seen since the lows of 2015 and 2016 at the onset of the downturn,” he said, adding that the industry continues to face challenges to a healthy recovery.
“News of the Trans Mountain Pipeline Expansion being approved for a second time following its purchase by the Government of Canada has not restored investor confidence in Canada,” Mar said.
“Concerns remain that it will be built in a timely fashion to open market access beyond the US, 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.”
He added that while “optimism is evident” with Alberta’s new government in office, the province’s curtailment order remains in place and continues to be a factor against new investment.
For natural gas producers across Alberta and B.C., activity is also hampered by low prices, he said, again from lack of market access beyond the US 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.”
PSAC 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.