Worst year on record for drillers
CALGARY• Drilling activity in the oilfield has slowed to the point that 2016 will be the worst year on record for the oil and gas industry, the Canadian Association of Oilwell Drilling Contractors said Wednesday in a revised activity forecast.
The CAODC’s updated forecast for the fourth quarter of this year shows a 25 per cent drop in new oil and gas wells drilled from its original forecast in November. It also shows that an average of only 140 rigs were put to work during the course of this year, 31 per cent lower than the 204 rigs the CAODC initially forecast, and that drilling companies will retire 87 rigs that are no longer working.
“The oil and gas services industry is facing the most difficult economic time in a generation,” CAODC president Mark Scholz said in a release. “In fact, 2016 will be the worst year in our recorded drilling activity history.”
The organization’s data go back to 1977 and spans the brutally challenging recession of the 1980s.
The data show an expected reduction in activity based both on the CAODC’s forecast released in November and a reduction in activity during the past two years as oil prices have languished and people employed in the sector have lost their jobs.
The CAODC estimates 5,120 people directly employed in the drilling industry have lost their jobs since 2014 and a further 29,440 people indirectly employed due to activity in the sector are also out of work.
Scholz took aim at the Alberta government’s new carbon- pricing policy and its hike on corporate taxes for worsening an alreadytough situation for drillers. He also said problems in the industry have been compounded by Ottawa’s delays for pipeline and liquefied natural gas project reviews.
“If the federal government is serious about strengthening the middle class and creating long-term employment opportunities for Canadians, it needs to approve these projects ,” Scholz said.
“Although the 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,” he explained.
In 2014, oilfield service companies in Canada drilled 11,226 oil and gas wells. That number fell to 5,292 in 2015 after oil prices fell sharply.
The CAODC initially forecast companies would drill 4,728 wells this year as commodity prices have continued to languish and strain cash- strapped oil and gas producers, but the organization is now revising that number down to 3,562 — 68 per cent fewer wells than were drilled two years ago.