Saskatchewan could outpace Alberta in oil and gas well drilling in 2017 — albeit slightly — for the first time in decades, according to the latest forecast from the Petroleum Services Association of Canada (PSAC).
PSAC released its 2017 Canadian drilling activity forecast on Wednesday, which projects a total of 4,175 wells to be drilled in Canada next year, a 5.7 per cent increase from PSAC’s estimated total of 3,950 wells in 2016. PSAC bases its 2017 forecast on average natural gas prices of $2.50 per thousand cubic feet and crude oil prices of US$52 per barrel (West Texas Intermediate).
“We are seeing a small uptick in activity for 2016-2017 as we head in to our traditional winter drilling and completion season,” PSAC president Mark Salkeld said in a news release. “Beyond that, it is hard to find support for any significant ramp up of activity over what we are forecasting, as geopolitics and increased supply continue to keep commodity prices low, and lack of access to global markets keeps a chokehold on the Canadian industry.”
Provincially, PSAC estimates 1,900 wells to be drilled in Alberta, and 1,940 wells for Saskatchewan, year-over-year increases of 53 and 240 wells, respectively. Drilling activity in Manitoba is expected to decline by 68 per cent year-over-year from 74 wells in 2016 to 50 wells in 2017. Activity in British Columbia is also projected to decline from 320 wells in 2016 to 280 wells in 2017.
Although PSAC expects 2017 drilling activity to be better than 2016, the projected total of 4,175 wells is still 63 per cent lower than the number of wells drilled in 2014. In fact, Saskatchewan alone saw a record 4,195 oil and gas wells drilled in 2003, slightly more than PSAC’s projected well count for the entire country in 2017.
“We are limited in our growth here in Canada as long as we only have one customer, the U.S., a customer that has quickly become our biggest competitor,” Salkeld said, adding that Canada needs to build pipelines to get oil to tidewater.
Energy and Resources Minister Dustin Duncan said the PSAC forecast confirms what other organizations, like the Fraser Institute, have been saying about Saskatchewan for years — that it’s one of the best places in North America to look for oil and gas.
“It’s significant that Saskatchewan is expected to lead Alberta in drilling in this upcoming year,” Duncan said Wednesday. “It says a lot about Saskatchewan. Obviously, we’ve got good geology. We’ve tried to put in place a stable regulatory environment for companies so they feel confident in investing in Saskatchewan’s economy, while ensuring that we have a competitive tax and royalty regime.”
In fact, Duncan noted Scotiabank recently released a report indicating six of the top 10 oil and gas plays in North America, based on return on investment, are in Saskatchewan. Earlier this year, the Fraser Institute’s survey of global energy executives ranked Saskatchewan as the best jurisdiction to explore and develop oil and gas for two years in a row.
“We’re seeing some positive news. Once prices start to improve a little bit, we’re going to see more dollars being put into the economy through the drill bit.”