“Shaping up to be the worst one”-PSAC releases dire drilling forecast

“It is shaping up to be the worst one.”

Those words from Petroleum Services Association of Canada President and CEO Mark Salkeld, when describing the state of the current economic downturn compared to others.

He made the comments during PSAC’s 2016 Drilling Activity Forecast announcement in Calgary Thursday, as the group predicts just 3,315 drills will be in operation this year.

That’s a 36 per cent decrease from PSAC’s November 2015 forecast, based on this year’s forecast of average natural gas and oil barrel prices, as well as the Canada-US exchange rate.

Salkeld said a key difference was member companies going into the downturn in 2008-2009 and how many came out.

He said going in there were 265 companies and 235 survived on the other side and that number was maintained up until last year, but now there’s only 175.

“The employee head count has gone from 60,600 to 34,700, so our member companies have lost our employees and that’s just in our membership base,” he said. “We’re talking tens of thousands of people unemployed with no end in sight.”

In 2011, 12,893 were in operation.

Of the 3,315 expected drills this year, 1,891 are in Alberta, down from 2,733 in PSAC’s original forecast.

“It could get worse absolutely, we’re sitting under a cloud right now,” Salkeld said. “We’re definitely not out of the woods yet.”

That being said, Salkeld said he is optimistic on the prospect of potential pipeline approval, following meetings with Prime Minister Justin Trudeau and his cabinet ministers, as well as Premier Rachel Notley.

“They get it, they know what it means,” he said. “I felt comfortable that Minister Carr and Minister McKenna get it, but it’s not dismissing the environment minister’s responsibilities, she’s not taking that lightly and it’s about clean tech and it’s about producing our oil and gas the best.”

“We’ll get a pipeline or two,” he said.

Eurasia Group Director of Global Energy and Natural Resources Greg Priddy said due to various international factors, including Iran getting back into the global market and upheaval in Venezuela, Canada isn’t going to get a balanced market until next year.

“The bottom line takeaway for somebody who’s not an oil specialist is this is a slow, gradual, rebalancing of the physical market that’s taking a lot longer than people would hope,” he said. “But it’s coming along and we’re past the halfway point.”

Priddy also had a prediction on Canada and pipelines.

“There needs to be another pipeline in order for growth to come back as prices recover and I think we’re going to see one of those at least this year,” he said. “But in line with our views, Energy East seems to have been kicked down the road as we expected.”