Wanted: 3,000 Field Hands for Canadian Winter Drilling
Canadian production is expected to fall short of filling its
expanded export pipeline capacity by 1.5 Bcf/d in 2001 and 1 Bcf/d
in 2002, according to the Canadian Energy Research Institute's
(CERI) annual deliverability survey.
Those results were revealed at the same time the Canadian
Association of Oilwell Drilling Contractors launched a nation-wide
personnel recruitment drive to fill what it described as an
"immediate need" for 3,000 field hands. CAODC president Don Herring
said "our 90 member companies, which run more than 1,500 (drilling
and well-servicing) rigs, are facing a severe shortage. . . ..the
demand for oil and gas is high enough that most of the fleet will
be in the field this winter and we need to recruit people right
The one thing that is not short is demand. Cold snaps and
forecasts of a nasty winter sent spot prices in Alberta, source of
80% of Canadian production, up to a record C$8.02 (US$5.50) per
MCf. Canadian analysts predicted spikes to C$10 (US$6.70) if a
return to normal winter weather makes heating-season realities sink
in on the markets.
ERI made the predictions of export shortfalls despite producers'
declared investment intentions to fill up the space resulting from
expansions of the TransCanada and Foothills-Northern Border systems
plus Alliance Pipeline, which expects to go into full commercial
operation Nov. 30. While western Canadian pipeline capacity will
hit 19 Bcf/d, CERI's models anticipate production will average 16.8
Bcf/d this year, 17.5 Bcf/d in 2001 and 18 Bcf/d in 2002.
Deliveries to the U.S. are already approaching nine Bcf/d, and most
of Alliance's 1.5-Bcf-daily capacity is dedicated to exports.
"The existence of excess pipeline capacity through 2002 means
that western Canada producers can expect to remain connected to
overall North American pricing trends for at least several years.
With these trends generally supporting strong prices, producer cash
flow is likely to remain well above what the industry can
efficiently invest in exploration and development drilling in
western Canada," CERI said.
And, there is more to the lag than shortages of labor, the
report suggested. The institute pointed to continued reliance on
shallow drilling for low-cost but rapidly-depleted wells in
southern Alberta and Saskatchewan, as well as lengthy periods of
time and substantially higher spending to generate bigger prospects
along the foothills of the Rocky Mountains in western Alberta and
northeastern British Columbia.
High prices have also revived investment in oil. Of a collective
C$5.7-billion (US$4-billion), 54% increase in Canadian producer
capital spending this year, CERI calculates that 69% went into oil
projects. While the institute says corporate budget announcements
since its survey was done indicate collective spending is going up
another 18%, it projects that oil will continue to increase its
share so long as its prices remain high.
Unless markets change again, the gas share of Canadian producer
investment is projected to fall to 54% in 2002 from about 70%
during the 1997-99 period of poor oil prices. Barring faster
acceleration of deeper, more remote drilling than has happened to
date, CERI projected a continued focus on shallow drilling will
require more than 10,000 Canadian gas well completions by 2002 in
order to keep up with the market. "It may very well exceed the
capabilities of the industry to identify enough prospects, mobilize
enough equipment and skilled personnel to drill the targets, and
even to obtain the land and regulatory approvals necessary to
undertake the work." The flood of activity "may also exacerbate
tensions between landowners and industry," which are already
running high because a 30% and growing portion of Canadian output
is "sour" or laced with hazardous hydrogen-sulphide.
CERI suggested those intent on tapping Alaska gas are on the
right track in acting as if the Arctic's turn has finally come.
"The availability of additional capital may encourage more of the
industry to undertake activities involving higher risks and rewards
as well as longer-term payback." Watch for "projects in the north,
offshore as well as exploration of untried areas or formations in
western Canada," the institute suggested.
Gordon Jaremko, Calgary