The Canadian Association of Oilwell Drilling Contractors expects 2016 to be the worst year for drilling activity in almost four decades of record keeping.
The association revised down its forecast for the year on Wednesday, dropping the number of expected well drillings for the year by a quarter to 3,562 compared with its forecast last November.
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Drilling activity has been on a steep decline as the drop in oil prices has prompted companies to cut back on exploration and early development.
But Calgary-based Earth Drilling says it is surviving the downturn by going after other type of rig work in the city.
“The local drilling work around here with the infrastructure–anywhere from trunk lines to the road construction–are the things going on,” Earth Drilling vice president Chris Gourlie said. “So we kind of jump on that wagon as soon as we can and we work with a lot of the engineering firms in the city.”
The company says it has been able to double both its work force and its equipment size in the past year because of its new business strategy.
Earth Drilling hasn’t totally abandoned oil patch contracts, but does not expect to see a rebound in work until the price of oil also rebounds.
This year’s expected drill count is down 33 per cent from last year’s 5,292 wells drilled, and down 68 per cent compared with 2014 when 11,226 wells were drilled.
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The drop in well drilling has meant fewer jobs in the industry and fewer rigs needed, with the CAODC revising down the direct and indirect employment numbers by 6,075, or 28 per cent, to 15,390 for the year. The number of rigs needed in the fourth quarter has been revised by 31 per cent to 140 rigs.
CAODC president Mark Scholz said in a statement that the higher tax burden and regulatory delays are creating investment uncertainty in Canada.
“The oil and gas services industry is facing the most difficult economic time in a generation,” said Scholz.
“Although government does not have control over the price of oil, it has influence in ensuring Canada is an investment destination of choice once the industry recovers.”
On Thursday, the opposition Wildrose party issued a statement calling for Alberta’s NDP government to repeal its carbon levy and to reduce taxes and loosen regulations in the wake of the CAODC’s assertions.
“As the price of oil was nosediving, the NDP government stubbornly doubled down on tax increases and introduced a new $3 billion carbon tax that they never campaigned on without thinking twice about the consequences,” Wildrose leader Brian Jean said in the statement. “While the NDP isn’t responsible for low oil prices, they have made a bad situation much, much worse by helping to spur further job losses leaving many families suffering and wondering what to do next.”
In the statement, Wildrose energy critic Leela Aheer criticized Premier Rachel Notley’s argument that the NDP carbon levy would bring about a “social licence” for new pipelines, saying hearings into pipeline projects have been “hijacked by radical activists” and that the NDP government has “chased away investment.”
Scholz said 2016 is expected to be the worst year for the industry since it started keeping drilling records in 1977.
READ MORE: Oil well services company in ‘survival mode’; drilling forecast slashed
With files from Global’s Gary Bobrovitz and Phil Heidenreich.
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