Drillers busy for rest of 2011, playing catch-up

CALGARY — Oil and gas drillers are busy playing catch-up after severe spring flooding throughout much of Western Canada kept their rigs on the sidelines, but another challenge is lurking: worker shortages.

CALGARY — Oil and gas drillers are busy playing catch-up after severe spring flooding throughout much of Western Canada kept their rigs on the sidelines, but another challenge is lurking: worker shortages.

“It’s looking very, very good for the industry,” said Mark Salkeld, president and chief executive officer of the Petroleum Services Association of Canada.

“All the equipment that’s available to go to work is pretty much contracted and the only bottleneck we’re looking at, really, is labour.”

In late July, PSAC upwardly revised its 2011 drilling forecast to 13,325 wells, an increase of 375 from its April prediction.

The industry group made its bullish forecast despite an onslaught of wet weather, which prevented companies from drilling in southern Saskatchewan and other key energy-rich areas for much of May and June.

Canada’s largest drilling company, Precision Drilling Corp. (TSX:PD), said the floods — not to mention forest fires and pipeline outages — made the second-quarter a tough one.

“The good news is, though, our customers did not cut or reduce their annual drilling budget because it rained in June,” Kevin Neveu told analysts on a conference call last month.

“We expect they’ll make every effort to spend that money during the balance of 2011, further stimulating rig demand.”

Indeed, Salkeld said rigs are busy from the shale gas fields of northeastern British Columbia through to emerging oil plays in Manitoba.

“All the traditional areas are as busy as they can be, and it’ll ramp up again with the freeze-up,” he said.

“When we get into the fall and winter season, we’re expecting it to ramp right up again.”

Traditionally, industry activity has tended to be cyclical. But between the 2008-2009 recession and wrangling over Alberta’s royalty take, the sector experienced a much more prolonged slump than usual. A lot of skilled workers, discouraged by their job prospects, abandoned the sector and haven’t returned.

Now that activity is finally picking up again, the industry finds itself in a lurch, Salkeld said.

“With the amount of activity that we’ve got ahead of us, we just don’t have enough people,” he said.

“And that’s the only thing that’s holding us up. If there’s any equipment against the fence, it’s there because we don’t have people to operate it all.”

The latest rig activity update from FirstEnergy Capital said 519 rigs, or 64 per cent of the total fleet, are currently at work in Canada. That marks a nearly 36 per cent improvement from the same week of 2010.

As has been the case for a long time now, the activity is overwhelmingly geared toward oil drilling, since prices of that commodity have been much more robust than those of natural gas.

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