Canadian natural gas and oil drilling will continue to decline next year, predict the industry’s field contractors.
The 2020 well count will drop to 4,500, down by 500 (10%) compared with 2019, says an annual forecast released Thursday by the Petroleum Services Association of Canada (PSAC).
The projected 2020 field action would only be 43% of the 10,390 Canadian wells done in 2014 before gas and oil prices fell. The slump foreseen next year would cut activity back towards the Canadian industry bottom of 3,744 wells in 2016.
Supply surpluses, pipeline capacity shortages and regulatory risk are expected to worsen effects of stagnant commodity prices.
The PSAC drilling forecast rests on wary projections of 2020 annual averages of C$1.60/Mcf/d ($1.20) and $58/bl.
Across the western gas and oil producer region, 2020 well counts are forecast to drop from 2019 by 235 to 2,155 in Alberta, shrink by 200 to 1,795 in Saskatchewan, dip by 45 to 345 in British Columbia, and go down by 20 to190 in Manitoba. Elsewhere in Canada, PSAC forecasts only 15 wells in 2020.
The 2020 Canadian industry activity expectations are consistent with “a very disappointing 2019” that let down field contractors with a well count that is shaping up to be 2,000 less than forecast a year ago, said PSAC president Gary Mar.
“The outlook for 2020 is even worse with exploration and production companies choosing to buy back their own under-valued shares, pay dividends and pay down debt rather than reinvest in Canada,” said Mar.
“It’s hard to justify spending or attract new capital investment when market access constraints remain and policy uncertainty persists.”
The minority government that emerged from the Oct. 21 federal election heightened anxiety in the Canadian fossil fuel industry about the evolution of national energy policy. Pro-development Conservatives remain in opposition with 121 of 337 seats in Parliament.
Power in Ottawa is shared by parties dedicated to climate change policies such as carbon taxation and promoting energy transition away from fossil fuels: the Liberals with 157 seats, Bloc Quebecois with 32, New Democrats with 24 and Greens with three.
“Unrelenting focus on climate action” pervaded the election, said Mar. He called the results a fractured majority of “parties that have no interest in the global greenhouse gas reductions that Canada’s oil and gas industry can deliver nor the economic benefits that Canada’s most prolific industry and largest exporter provides.”
To ease the limited pipeline capacity part of the obstacles confronting the industry, the Alberta government announced exemptions would be made available from provincial production quotas for railway oil deliveries, starting in December.
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