Canada’s oil and gas drilling forecast revised to 49 year low as producers cut spending

Alberta energy companies losing billions in downturn
(April 29) First quarter numbers show red ink and expense cuts, as energy companies grapple with low oil prices. Provincial affairs reporter Tom Vernon has the details.

The Petroleum Services Association of Canada has revised its 2020 Canadian drilling forecast to an almost 50-year record low of 3,100 oil and gas wells, a level not seen since 2,900 wells were drilled in 1972.

PSAC interim CEO Elizabeth Aquin says more than $7 billion of capital investment in the energy sector has been cancelled to date this year thanks to demand destruction from measures to deal with the COVID-19 pandemic and a supply surplus due to an oil price war between Russia and Saudi Arabia.

READ MORE: Precision Drilling reports $5.3M Q1 loss, warns of drop in demand well into 2021

She said blockades of the Coastal GasLink Pipeline and cancellation of the Frontier oilsands project have also hurt investor confidence in the Canadian oil and gas industry.

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PSAC chairman Mark O’Byrne says the industry appreciates government assistance such as $1.7 billion in federal funding to clean up orphan and inactive wells in Alberta, Saskatchewan and British Columbia, but will need more help to ensure survival.

The new forecast represents a decrease of 1,400 wells, or 31 per cent, from PSAC’s original forecast of 4,500 wells announced in October.

About 4,900 wells were drilled in 2019.

READ MORE: PSAC cuts oil and gas drilling forecast again as slowdown deepens

“The majority of the impact will be felt on the oil side as supply overwhelms demand and storage levels surge to capacity,” said Aquin.

“This has left producers little incentive to drill for more with the price of a barrel of oil now fetching less than a cup of coffee. We expect to see a 38 per cent drop in activity for oil wells versus 2019.”

Low oil prices likely to remain for 12-18 months due to oversupply: Alberta premier
Low oil prices likely to remain for 12-18 months due to oversupply: Alberta premier