PSAC forecasts continuing low oilpatch activity
Dave Cooper, edmontonjournal.com
Published: Thursday, November 05, 2009
EDMONTON - Next year will look a lot like this year for oil and gas drillers, with just 8,000 wells expected in 2010, the same as this year, the Petroleum Services Association of Canada said Thursday.
That estimate is in line with the expected tally for 2009, which has already dropped by 1,500 from forecasts in July.
"Drilling activity levels are plateauing as we ride out this recession, said Roger Soucy, PSAC president, in a release.
"Last year at this time, we were expecting to see more than 16,000 wells drilled in 2009. But activity slowed substantially throughout the year as the recession dug in. We are now at a much lower activity level, that we think will be sustained in 2010."
PSAC estimates there will be 5,095 wells in Alberta and 630 in B.C.--a decrease of five per cent in Alberta and increase of seven per cent in B.C. over expected 2009 drilling levels, largely due to shale gas drilling in the northeast area of the province.
Saskatchewan's drilling rate should increase by 10 per cent, to 1,935 wells, as work in the Bakken oil play in the far south of the province increases.
"We all know that oil and gas activity is predicated on price," said Soucy.
"In 2010, oil prices will be adequate to sustain conventional oil activity. As a result we are forecasting an increase in oil drilling areas like Saskatchewan and northeastern Alberta," he said.
"Gas pricing, on the other hand, remains relatively low and we are not expecting any significant gas price turnaround in 2010. That, combined with industry's focus on shale gas drilling, has led us to forecast a 30-per-cent drop in the conventional shallow gas drilling area of southeast Alberta."
PSAC is basing its forecast on average natural gas prices of $5 per million cubic feet (mcf) in 2010.
Last week, the Canadian Association of Oil Well Contractors used a forecast price of $5.50/mcf for 2010 to predict a slight improvement in drilling.
Gas futures for the second half of 2010 have been trading in the $5.50/mcf range. The current price is about $4.50/mcf.
Both groups expect oil to range in the $70-72 US per barrel range, although the benchmark West Texas Intermediate crested $80 this week.
"We are effectively moving into the third year of a downturn," said Soucy.
"The economic recovery is going to be long and slow, and that will continue to affect energy demand for the United States, Canada's largest energy customer."
Soucy says his 270 member companies, which employ more than 60,000 people, "have been trying to hold steady, but now we're going to see some consolidation as the industry strives to remain profitable."
dcooper@thejournal.canwest.com
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