Drilling in decline

The bad news is that the number of oil and gas wells drilled in Canada this year will likely be less than half the tally for either 2007 or 2008. The good news? This might be as bad as it gets.

The bad news is that the number of oil and gas wells drilled in Canada this year will likely be less than half the tally for either 2007 or 2008.

The good news? This might be as bad as it gets.

The Petroleum Services Association of Canada is now forecasting that the 2009 well count will end up at about 8,000. This projection, announced Thursday, is the latest in a series of downward revisions by the national trade association that represents service, supply and manufacturing companies in the upstream petroleum industry.

Last November, PSAC was predicting that 16,750 wells would be drilled this year. At the time, 2008 was on pace for a 17,043-well total and 2007 had ended with 18,557.

“We are effectively moving into the third year of a downturn,” said Roger Soucy, president of the association. “The economic recovery is going to be long and slow, and that will continue to affect energy demand from the United States, Canada’s largest energy customer.”

However, PSAC isn’t anticipating a further decline in oilpatch activity. Next year will also be a tough one for the petroleum services sector, said Soucy, but drilling is expected to hold steady at 8,000 wells.

This forecast was based on anticipated average prices of Cdn$5/mcf for natural gas and US$72 barrel for West Texas intermediate crude oil.

Despite its expectation that drilling levels in 2010 will be unchanged from 2009, PSAC believes the well count in Alberta will slide five per cent, to 5,095. The number for Saskatchewan is projected to jump 10 per cent, to 1,935; British Columbia should hit 630, up seven per cent; and Manitoba will spike 22 per cent, to 300, said the association.

Soucy said the improved oil prices should sustain conventional oil activity in areas like Saskatchewan and northeastern Alberta. Natural gas prices, however, are expected to remain relatively low, to the detriment of conventional shallow gas drilling areas in Alberta.

He added that an increased focus on shale gas formations will also reduce activity in conventional gas fields.

Soucy said consolidation in the industry is likely to occur as companies strive to remain profitable.

PSAC represents more than 270 companies with a combined payroll in excess of 60,000 people.

Last week, the Canadian Association of Oilwell Drilling Contractors said it anticipates the active rig count in Canada to average 209 this year, down 40 per cent from 2008. It expects this number to increase slightly in 2010, to 218.

CAODC said it is hoping for modest improvement by the end of next year, with activity strongest in British Columbia and Saskatchewan.

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