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PSAC forecasts 500 fewer wells next year

Calgary – The Petroleum Services Association of Canada (PSAC) released its 2020 Canadian Oilfield Services Activity Forecast on Oct. 31. PSAC expects a total of 4,500 wells (rig releases) to be drilled in Canada in 2020.
Gary Mar
PSAC president and CEO Gary Mar spoke to the SIMSA Oil and Gas Supply Chain Forum in Regina on Oct. 3.

Calgary – The Petroleum Services Association of Canada (PSAC) released its 2020 Canadian Oilfield Services Activity Forecast on Oct. 31. PSAC expects a total of 4,500 wells (rig releases) to be drilled in Canada in 2020. For 2019, the association’s final revised forecast predicts a yearly total of 5,000 wells.

PSAC bases its 2020 forecast on average natural gas prices of $1.60 CDN/mcf (AECO), crude oil prices of US$58/barrel (WTI), and the Canadian dollar averaging $0.76USD.

PSAC president and CEO Gary Mar said, “Following a very disappointing 2019 that saw activity plunge to 2015/2016 levels with about 2,000 fewer wells drilled than forecast, the outlook for 2020 is even worse with exploration and production (E&P) companies choosing to buy back their own under-valued shares, pay dividends and pay down debt rather than reinvest in Canada. It’s hard to justify spending or attract new capital investment when market access constraints remain and policy uncertainty persists. 

“With the unrelenting focus on climate action during the recent federal election campaign and the resulting minority government that is expected to be supported by parties that have no interest in the global GHG reductions that Canada’s oil and gas industry can deliver nor the economic benefits that Canada’s most prolific industry and largest exporter provides, PSAC is forecasting a further five per cent decline in activity to 4,500 wells.â€Â 

On a provincial basis for 2020, PSAC estimates 2,155 wells to be drilled in Alberta, and 1,795 wells for Saskatchewan, representing year-over-year decreases of 235 and 200 wells, respectively. At 190 wells, drilling activity in Manitoba is expected to drop by 20 wells year-over-year, whilst activity in British Columbia is projected to decrease from 390 wells in 2019 to 345 wells in 2020. At 15 wells for both 2019 and 2020, activity in Eastern Canada is expected to remain flat year-over-year.

Mar continued, “The only bright spot for oilfield services companies is the spending on production optimization, maintenance and repair work (MRO) that continues along with new decommissioning and closure activity. With additional funding in place for the Alberta Orphan Well Association and the introduction of the Alberta Energy Regulator’s Area Based Closure program, work in these areas has increased. This MRO and closure work has helped some companies survive while sadly, others have been forced to relocate, however reluctantly, to the US or other international locations or close their doors entirely.â€

Mar said, “It’s time our country had a vision for energy, a vision that could inspire Canadians to join together in support of our responsible energy development that benefits the lives of all Canadians. We are reducing our environmental footprint and GHG emissions through new technologies. Let’s find a way to work together for Canada to be the global leader and producer of choice rather than let countries with lower human rights, environment, and regulatory standards meet the needs of growing populations and under-developed nations.  Let’s stop penalizing ourselves while other countries reap the benefits that should be ours.â€Â 

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