Canadian energy sector expects uptick of activity in 2022

Click to play video: 'Oil and gas prices driving optimism within Canada’s energy sector'
Oil and gas prices driving optimism within Canada’s energy sector
WATCH ABOVE: Surging oil and natural gas prices are fuelling optimism and driving activity in Canada's energy sector. As Tom Vernon explains, more crews are expected to be on rigs next year – Nov 23, 2021

Canada’s oil and natural gas sector is forecast to see a rise in jobs and the number of wells drilled in 2022, according to a forecast from the Canadian Association of Energy Contractors.

The annual forecast is projecting 6,457 wells to be drilled in Canada next year, a 26 per cent increase over 2021, creating an additional 7,280 jobs in the industry. Despite this, Canada’s rig fleet is expected to shrink by eight rigs, to 481.

“After the historic lows we endured last year, 2021 served as a beacon of hope for our sector,” CAOEC President and CEO Mark A. Scholz said in a release.

READ MORE: Canadian oil drilling contractor association changes name to reflect energy transition

The worldwide drop in energy demand at the start of the pandemic sent energy prices in a free fall, WTI even dropped well into negative territory for a day, which caused a sharp drop in activity in the industry.

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As restrictions eased around the world, energy consumption picked back up, reaching pre-pandemic levels this fall.

READ MORE: Trans Mountain pipeline could be restarted by end of the week: company

The sector has seen a run of positive developments. Prices have strongly rebounded, with WTI reaching heights not seen since 2014, construction is well underway on the Trans Mountain expansion from Edmonton to the B.C. coast, and the Enbridge Line 3 replacement is now operational.

“A recovery is well underway in the industry,” said Scholz. “The best is yet to come in Canada’s energy sector.”

With that increased activity comes a return to something Alberta has traditionally been good at — recruiting eastern Canadians with the lure of vacant jobs and large paycheques. Scholz said a significant portion of the sector’s workforce historically came from Newfoundland, the Maritimes, Ontario and Quebec, but many of those workers returned home in recent years due to a shortage of jobs as well as the impact of the COVID-19 pandemic.

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Now, the push is on to get those people back. The CAOEC says a potential skilled labour shortage is the “biggest risk” standing in the way of long-term industry recovery, and Scholz said companies will need to carefully manage their capacity.

“Companies are beginning to reach out to some other jurisdictions, like the Maritimes and Quebec and Ontario, where we have traditionally advertised for skilled labour to come out to Western Canada to work,” Scholz said. “We’re starting to see that historical outreach … But there is going to be a lag in our ability to relocate people back.”

Scholz said wages in the oilpatch are already up 10 per cent year-over-year, but it will take more than money to lure eastern Canadians back to Alberta. He said many former rig workers are reluctant to return to their old industry until they know the current recovery will be a sustained one.

“It’s just going to take some time to get that confidence back in the workforce,” he said.

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Long-term, the traditionally 24-hour-a-day, hard-charging oil and gas industry may also have to make some concessions to millennials and members of generation Z, Scholz said.

“What we’re starting to see is a younger workforce that has a value system of greater time off with friends and family and a work-life balance,” he said. “I think what we’re starting to see is the workforce is starting to position the industry in a different type of operating fashion than it has in the past.”

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Click to play video: 'Is Alberta on verge of another oil and gas boom?'
Is Alberta on verge of another oil and gas boom?

Scholz cautioned that while there is optimism in the industry, Alberta’s oil and gas sector has undergone a sea change since 2014. After seven years of downturn, the priority for many companies is now paying down debt and fiscal discipline, he said.

“I think we need to temper the expectations of what we have traditionally seen in years past, the oil and gas booms of yesteryear. I think it is a reality that the market, although it is responding to those signals, is going to continue to be very disciplined, very focused and targeted in how that capital is allocated.”

Tim McMillan, president and chief executive of the Canadian Association of Petroleum Producers, said Tuesday he views the latest forecast from the drilling and services sector as “encouraging for everybody.”

“We are seeing more activity,” McMillan said. “It’s potentially less than we would have seen at this point in the cycle eight to 10 years ago, but it gives us a solid platform to build on.”

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“We might be heading into a period we haven’t experienced for some time, which is a labour shortage,” said Tristan Goodman, president of the Explorers and Producers Association of Canada. “We’re just not sure how that’s going to play out, but I see it as a potential issue we may have to address.”

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