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Labour shortage drills oilpatch

A trade association that represents more than 250 upstream petroleum companies is becoming increasingly bullish on the oilpatch.
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Mark Salkeld

A trade association that represents more than 250 upstream petroleum companies is becoming increasingly bullish on the oilpatch.

The Petroleum Services Association of Canada announced on Monday that it is increasing its estimate of the number of wells that will be drilled in Canada this year, to 12,750. That’s 500 more than PSAC was forecasting as recently as late last fall.

The well count in 2010 was 12,158, which marked a big improvement over the 8,350 wells completed in 2009. Canada’s peak drilling year was 2005, when there were nearly 25,000 wells.

PSAC said in a news release that its improved forecast reflects higher oil prices, with the association basing its 2011 estimate on an average price of US$85 a barrel for West Texas intermediate crude.

“Due to strengthening oil prices and innovations in technology, we expect 2011 to continue to see modest increases in drilling levels from 2010, recognizing shortages in skilled labour that restrict the ability of drilling and petroleum providers to realize full output capacity,” said PSAC president Mark Salkeld.

Those shortages are already acute, said Bonnie Snair, human resources manager with Red Deer-based High Arctic Energy Services Inc.

“It’s a hugely tight labour market, unbelievable.”

Compounding the problem is the increasing importance of having workers trained to a high standard, including with respect to safety.

“You can find people but if you want some experienced people, it is definitely a very tight market,” said Snair.

Unfortunately, she added, many skilled workers left the oilpatch during the economic downturn and have not returned.

Garnet Amundson, president and chief executive officer of Essential Energy Services Ltd., made the same observation last week while speaking to the Advocate.

“We lost a lot of knowledge and it’s going to be very hard for the industry to rebuild.”

PSAC expects that 8,390 of the wells drilled in 2011 will be located in Alberta, with 3,075 in Saskatchewan, 700 in British Columbia and 550 in Manitoba. These figures would represent a year-over-year increase of three per cent in the case of Alberta, 11 per cent for Saskatchewan, seven per cent for British Columbia and one per cent for Manitoba.

A notable trend has been the movement toward horizontal drilling, with PSAC expecting more than 5,000 such wells in 2011 — a vast increase from just a few years ago, when vertical wells were the norm.

“We continue to see an escalation in not only the amount of horizontal wells being drilled but also in the length of these wells,” said Salkeld.

Low prices continue to plague the natural gas side of the energy sector, with PSAC anticipating an average price of just C$3.85 per thousand cubic feet in 2011.

“The burgeoning supply of natural gas — despite reduced levels of drilling — is a direct result of shale gas production,” said Salkeld.

Based in Calgary, PSAC represents service, supply and manufacturing companies.

hrichards@www.reddeeradvocate.com