CALGARY — Oil and natural gas drillers in Canada will be busier this year than previously thought, an industry group predicted Wednesday.
The Petroleum Services Association of Canada said it expects 9,000 wells to be drilled in 2010 — a 12 per cent increase from a forecast the group published just two months ago.
Alberta accounts for all of the 1,000 wells added to PSAC’s November forecast, which had called for drilling in that province to be flat compared to last year.
“It’s primarily because the commodity prices, particularly natural gas, were a little better than expected,” said PSAC president Roger Soucy.
Drilling incentives that the Alberta government introduced in the depths of the downturn last year are have also helped.
“More of those gas wells in particular became economic again,” Soucy said.
PSAC now estimates 6,095 wells will be drilled in Alberta this year, an increase of four per cent over final 2009 drilling levels.
Meanwhile, the association expects British Columbia to have 630 wells drilled in 2010, an increase of 10 per cent from last year. Saskatchewan should see an 11 per cent increase to 1,935 wells, while Manitoba can expect a 29 per cent increase to 300 wells.
The improved forecast is primarily the result of strengthening prices for both crude oil and natural gas. Oil prices are expected to be US$74 a barrel, while natural gas prices are expected to be C$5.50 per thousand cubic feet.
“Improved prices led to a spurt in drilling activity in December 2009 and we expect stronger pricing to continue to impact drilling levels as we move through 2010,” said Soucy.
The final tally for 2009 was 8,450 wells drilled across Canada.
“We are cautiously optimistic about 2010,” Soucy added. “The commodity pricing signals have been positive so far but this may not be the quick and complete turnaround everyone is hoping for.”
The 9,000 wells PSAC expects to be drilled in Canada pales compared to the 20,000 or so the industry saw in 2006 and 2007 before natural gas prices cratered, said Michael Mazar, an analyst with BMO Capital Markets.
“It’s still not a fantastic forecast. It’s not all sunshine, lollipops and rainbows,” he said. “But it’s turning the corner and it’s moving in the right direction.”
The PSAC forecast doesn’t include how many days companies are expected to spend drilling — an often overlooked measure of the health of the oilfield services industry, Mazar said.
Drillers get paid by the number of days worked, rather than how many wells are drilled.
A complicated horizontal well used to tap into tough-to-access reservoirs requires more manpower than a conventional vertical one.
“It doesn’t take long to drill 2,000 metres straight, but to drill down 2,000 metres and then turn and go another 2,000 metres obviously takes at least double the time,” Mazar said.
“It will be interesting to see how (the forecast) actually translates into days of drilling.”
The Petroleum Services Association of Canada is the national trade association representing the service, supply and manufacturing sectors within the upstream petroleum industry.