Natural gas prices prompt PSAC to revise drilling forecast

A decline in natural-gas-related drilling has prompted the Petroleum Services Association of Canada to lower its expectations for oilpatch activity in 2012.

A decline in natural-gas-related drilling has prompted the Petroleum Services Association of Canada to lower its expectations for oilpatch activity in 2012.

The national trade association, which represents more than 250 companies in the service, supply and manufacturing sectors of the upstream petroleum industry, released a second-quarter update of its drilling activity forecast on Wednesday.

It’s now projecting that 13,150 wells will be drilled in Canada this year — a two per cent improvement over the 2011 tally of 12,850, but 1.5 per cent fewer than the 13,350 wells that PSAC was expecting as of January.

The association said in a release that record low natural gas pricing resulted in a drop in gas drilling during the second quarter. Other factors at play included the tight labour market, warm weather and adverse global economic conditions.

“There have been some conditions that have impacted expected drilling activity that were beyond our industry’s control,” said Mark Salkeld, PSAC president and CEO.

But, he added, productivity remains relatively high, with the majority of wells now longer and more complex than was previously the case.

“The first quarter of 2012 saw average well depth reach beyond 2,000 metres, and is a sure sign that our industry now operates very differently than even just five years ago, when vertical wells were still the prominent well type and technology,” said Salkeld.

“We are forecasting horizontal wells to make up over half of all well types this year, which is a marked increase from the horizontal well count of 2007, which levelled out at only 13 per cent of total wells.”

On a province-by-province basis, PSAC is now anticipating that 7,949 wells will be drilled in Alberta this year, down two per cent from 2011. Saskatchewan is expected to reach 3,962, up 13 per cent; in Manitoba the figure is projected to be 618, up six per cent; and in British Columbia the well count is forecast to hit 591, down five per cent.

PSAC’s updated forecast is based on average natural gas prices of C$1.90/mcf and crude oil prices of US$100/barrel.