The drilling industry is expressing “cautious optimism” about 2017.
The latest forecast from the Canadian Association of Oilwell Drilling Contractors projects the number of new wells next year will be 4665, up 31 per cent from the 3,560 wells expected this year. More than 11,000 new wells were drilled in 2014.
CAODC president Mark Scholz says Saskatchewan could supplant Alberta as the province with the most new wells. Previously, Scholz says drilling followed a 60-30 rule. “60% of the activity is in Alberta, 30% Saskatchewan. We think that is actually going to be about 50-50, if not Saskatchewan better than Alberta for the first time in quite some time.”
Scholz blames the provincial carbon tax for the shift in investment. “Capital is a very mobile instrument. And it’s moving to areas that it feels can get greater returns and has a greater level of predictability when it comes to deployment of capital. So, government policy matters and we’re starting to see that in action.” He adds the industry is calling on the federal and provincial governments to consider the global effect of policies noting the U.S. is Canada’s largest competitor in the oil and gas marketplace. “With the new Trump administration, we’re going to see lower business taxes, lower regulations, and no carbon tax. So Canadian businesses are going to be faced with competing in a very disadvantaged position.”
However, the CAODC president says there could be more interest in drilling in Alberta if a major pipeline is approved before the end of the year. “A positive announcement on a major pipeline project will signal to the investment community that Canada is serious about this industry, that it’s serious about developing its resources and I think it would have a significant factor in providing some needed confidence in the industry in the short-term as well as the long-term.”
Scholz says industry warned the government not to bring in a carbon tax without first having a pipeline approved. However, he says if government approves the Trans Mountain Pipeline or the Energy East Pipeline or both the carbon tax would be less of a concern. “At least some of these carbon taxes can be somewhat affordable. Right now, our industry doesn’t even get full value for its product. We can’t get North American pricing. We have our own standard pricing that’s even lower than North American pricing because we don’t have access to market.”
The CAODC 2017 Drilling Forecast projects the number of drill rigs will working nearly 8,600 more days next year, but the rig fleet will continue to decrease from 665 rigs to 610.