Brian Zinchuk is editor and owner of Pipeline Online
Petroleum Services Association of Canada president and CEO Gurpreet Lail. Handout
CALGARY – Saskatchewan is expected to see a 15 per cent increase in wells drilling in 2022, compared to 2021. That’s according to the Petroleum Services Association of Canada (PSAC), which released its 2022 Canadian Oilfield Services Activity Forecast on Nov. 10.
PSAC is forecasting an increase of 198 wells for this province, for a total of 1,495 for 2022, as opposed to 1,297 for 2021.
Nationally, PSAC expects a total of 5,400 wells (rig releases) will be drilled in Canada in 2022. The association is also lifting its 2021 forecast due to improved activity in the second half of the year.
“For 2022 we expect drilling activity to be higher than 2019. But, although we’ll be back to pre-COVID levels, we’re not going to be near where we were pre-downturn,” said PSAC’s president and CEO Gurpreet Lail. That downturn lasted 7 years, with a precipitous drop in oil prices starting Nov. 26, 2014, when OPEC dramatically increased oil production. It has only been in recent months that WTI oil has returned to the price level before that date.
Lail said, “Global supply-demand imbalances are leading to higher commodity prices, and we expect drilling activity to increase out of necessity. However, at the same time, we’re also seeing a severe labour shortage, which has the potential to impact how much growth the industry can achieve in the coming year.”
Lail spoke to Pipeline Online by phone on Nov. 10.
Regarding the increase of 198 wells, she said, “I think about half of the 198 we have taking place in southwestern Saskatchewan.”
For PSAC, southwestern Saskatchewan includes what is commonly referred to here as west central Saskatchewan, including the Kindersley area. They’re expecting a lot of activity in the Viking formation, which is in both Alberta and Saskatchewan.
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The final revised forecast for 2021 predicts a yearly total of 4,650 wells drilled across Canada. PSAC based its final 2021 forecast on average natural gas prices of $3.60 CDN/mcf (AECO), crude oil prices of US$67/barrel (WTI), and the Canadian dollar averaging $0.80USD. PSAC’s forecast for 2022 has the WTI price at an average at US$70/barrel, and AECO natural gas average at $4.10 CDN/mcf.
Asked if they were being too cautious with those price assumptions, Lail said, “I wouldn’t say we’re being a little too cautious. There’s a lot to be cautious about right now. But I would say that we put out this forecast, which is based on the 2021 average. And even though the WTI price is high right now, I think, when we’re factoring in the recent increases and expected increases for the remainder of the year, the annual WTI average will work out to between US$67 to US$69. So, for 2022, it was it was safe to assume that we would get to US$70.”
Is PSAC anticipating a dip sometime next year?
Lail replied, “We’re anticipating a dip, and there’s factors at play, right? There’s may be activity and there’s prices, except for what happens when projects halt, because we don’t have enough labour.”
Labour came up when she was asked why more rigs aren’t being fired up, particularly in southern Saskatchewan, with current oil prices. On Nov. 10, RiggerTalk.com indicated there were 31 active drilling rigs in Saskatchewan. Southeast Saskatchewan had 13, with three in the southwest, 10 in west central and 11 in northwest Saskatchewan.
Lail said there are different factors. “Labor’s a huge factor. Getting people back to work on sites is a huge factor – trained workers back on site is going to play a big factor, especially when we get into Q2. It’s going to be compounded. So that should not be taken lightly. Labour is big issues. Supply chain is a big issue.
“But the other issue is, when you’re looking at our producers, for the E & P (exploration and production) companies, they’re sticking to their disciplined approach on spending, right? So they’re paying down their debt. They’re paying down share buybacks. They’re not really investing in activity, to that degree where it would then translate into, ‘Hey, everybody’s busy, everybody’s making strides in their business.’ That’s not where it’s at right now.”
Asked about PSAC’s thoughts on Prime Minister Justin Trudeau’s promise to cap emissions from Canada’ oil and gas sector, Lail responded, “If I look at it from our membership point of view, and for PSAC, we know they Canada can (be), and traditionally is, a world leader in responsible energy development. And that can be shown through decades-long investments in advanced innovation for sustainable oil and gas development, including lower GHG emissions by companies within our sector. The invert emerging view that hydrocarbons can’t be any part of a sustainable future, I don’t think that is even realistic. I think even with our responsible production, and new carbon technologies, that statement alone is a major setback for Canada, and for industry.
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“If we look at Canadians, as a whole, to ensure that we, all of us, get the benefit from the energy sector, PSAC is calling on all levels of government to come up with a coherent policy approach. And that includes clear policies to advance opportunities and carbon capture, utilization and storage, policies for commercial development of blue hydrogen for natural gas. We need to start working together, because Canada is (the) most responsible. And I think when you look at ESG (environment, social and governance), we have the opportunity to provide the highest ESG standards. And we can showcase to the world what we can do, if government will look at us as a partner at the table, and allow us to be part of that solution.”
Some investors and governments are giving the impression oil and gas is in its sunset. Asked about that, she replied, “I disagree. You’re going need fossil fuels to get to the new ‘cleaner energy,’ as we’re calling it. You can’t do one without the other. And, when it comes to the service sectors, the members that we represent are the ones that are coming up with the innovation, the technologies, the processes, to help get us in that net-zero in 2050.
“And so, is it an industry that’s going into sunset? I don’t I don’t believe that at all. You’re going to need fossil fuels to even get to other forms of energy, and we’re all here to work together. So, people need to look at it from that point of view.
“And honestly, like energy security is a huge issue. It is a real issue. And Canada has a role to play in that, in providing it across the globe. So that’s what we should be talking about it, and no matter what level of government you’re at, you should be proud to have this industry in your own country that is as ethical as it is, and not look at it differently.”
On a provincial basis, PSAC estimates the following drilling activity for 2022:
- 3,125 wells in Alberta, representing a year-over-year increase of 450;
- 1,495 wells for Saskatchewan, an increase of 198 wells;
- 605 wells in British Columbia, a year-over-year increase of 79 wells from 526 drilled in 2021;
- 160 wells drilled in Manitoba, up 21 wells from the 139 drilled in 2021; and
- 15 wells expected for Eastern Canada, up from 13 wells the previous year.
Similar to 2021, the majority of activity is expected to occur in the Montney and Viking formations.
“The pandemic brought an extraordinary level of challenge to an already tense industry environment,” said Lail. “Through this difficult time, PSAC members supported our industry partners to produce essential oil and gas products. Those products warmed and brightened our homes – and our home offices — and enabled the manufacture of the many products that kept our hospitals, health care workers, and all Canadians safe.”
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