Labour weather limits activity: PSAC

A petroleum industry trade association’s optimistic outlook for 2012 has been blunted by worries about the tight labour market, among other concerns.

A petroleum industry trade association’s optimistic outlook for 2012 has been blunted by worries about the tight labour market, among other concerns.

The Petroleum Services Association of Canada announced on Friday that it has revised downward its forecast of drilling activity in Canada for this year. After projecting in November that the domestic well count would hit 15,100 in 2012, PSAC is now expecting a tally of 13,350.

“Due to skilled labour shortages, warm weather hampering the use of heavy equipment, weak gas prices related to oversupply and the ongoing uncertainty created by the European economic debt crisis, we are seeing restricted capacity across the board,” said Mark Salkeld, president and CEO of PSAC.

Salkeld said rigs and equipment are sitting idle because companies can’t find the skilled workers needed to operate them. And the outlook going forward isn’t much better.

The Petroleum Human Resources Council of Canada has estimated that some 39,000 workers will be needed just to replace those expected to retire by 2020. Industry growth could inflate the figure to as high as 130,000, said the council.

Industry is working with schools and communities to attract more workers, and with governments to make it easier to tap into labour pools outside of Alberta, said Salkeld.

Even at its reduced level, PSAC’s forecasted well count for this year would exceed the actual 2011 tally of 12,917 — a figure that came in 783 wells lower than the association was expecting as recently as November. Salkeld attributed this shortfall to an industry shift toward unconventional oil and gas drilling with long horizontal wells that are more productive.

“We may be drilling fewer wells, but the wells themselves are taking longer to drill,” he said. “They’re more complex.”

On a province-by-province basis, PSAC’s biggest downward adjustment applied to Alberta. It’s anticipating 8,267 wells will be drilled here in 2012, much lower than the 9,255 is was forecasting 2 1/2 months ago, but still up two per cent from 2011.

The count for B.C. is unchanged at 640, which would represent an improvement of three per cent from last year. Saskatchewan is expected to hit 3,739, not as high as the 4,650 previously anticipated but up six per cent from 2011; and PSAC predicts that Manitoba will drill 665 wells, which is up from an earlier forecast of 525 and 14 per cent higher than the actual figure for 2011.

PSAC’s forecasts are based on anticipated average crude oil prices of US$90 a barrel (West Texas intermediate) and average natural gas prices of just C$3.25 per mcf.

So far this winter, which is the busiest season for drilling, warm weather has hampered work in many areas.

“We are optimistic that our forecast update at the mid-year point will show relative stability from our now updated forecast of 13,350 wells, though we will still be feeling the effects of balmy weather and a labour shortage that is not going away,” Salkeld said.

PSAC represents nearly 260 member companies in the service, supply and manufacturing sectors of the upstream petroleum industry.