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Canadian Oil Drilling Forecast Gets Slashed Again

Some 2,800 new wells will be drilled in Canada this year, according to the Petroleum Services Association of the country. This is the third downward revision the PSAC has made so far this year amid the continuing oil price crisis. Its previous revision was to a 50-year low of 3,100 wells, the Canadian Press reports.

Last year, Canadian oil and gas companies drilled 4,900 wells. That was despite the low prices for Canadian oil resulting from a shortage of pipeline capacity and the global glut.

Oil prices are certainly a factor in the businesses’ decision to drill fewer wells this year, but it is not the only one. A slow recovery of the wider economy and high debt levels among oil and gas drillers are also at play, according to the interim chief executive of the Petroleum Services Association of Canada, Elizabeth Aquin.

Interestingly, just a day earlier, IHS Markit forecast that oil sands production in Canada was set to grow despite the adverse effects of the pandemic on the energy industry.

“The impact of COVID19 has changed the driver of the lower investment period, not necessarily the direction of long-term expectations,” two senior IHS Markit analysts noted, saying they expected oil sands output to reach 3.8 million bpd in 2030, just 100,000 bpd less than pre-crisis projections.

In more positive signs for the industry, earlier this month, reports emerged that Canadian oil and gas producers were bringing back curtailed output. According to Bloomberg, about a fifth of the 1 million bpd in shut-in production was being brought back as oil prices recovered from the multi-year lows seen in April.

“Nobody should be surprised to see our production moving back to full production capacity. We are significantly cash-flow positive at the levels we’re at now,” said the chief executive of oil sands major Cenovus.

By Irina Slav for Oilprice.com

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