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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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What's Behind Canada's Oil Driller Exodus?

oil pipeline

Canadian drillers are moving rigs south to the U.S. to seize more profitable opportunities. But it’s not just the bright prospects of the Permian that is attracting Canadian companies—moving south of the border has more to do with favorable tax rates and more takeaway capacity and market access opportunities than there is in Canada.

Last week, Calgary-based AKITA Drilling said it would be expanding in the Permian and has contracted a rig with a major U.S. operator that has a significant presence in the Permian. AKITA Drilling has redeployed the rig from the Western Canadian natural gas basin, where it faced limited opportunities to work, the company said.

Another Calgary-based firm, Trinidad Drilling, said on Monday that it would be moving eight rigs to the Permian to meet increased customer demand, redeploying idle rigs from its existing global operations with weaker demand, including Canada.

Trinidad Drilling’s CEO Brent Conway told The Canadian Press in an interview that he would rather avoid the move if he could find profitable drilling work in Canada. The rigs moved to the U.S. would be crewed by U.S. workers, as Canadian crews likely won’t move with the rigs, the manager added.

“What’s happening in the U.S.? They’re lowering taxes, they’re building pipelines and they’re starting to export oil,” Conway told The Canadian Press, adding that in Canada, taxes have been raised, pipelines are not getting built, and there isn’t much regulatory certainty.

His sentiment is shared by AKITA’s chief executive Karl Ruud, who said that the U.S. offers more attractive prospects with more favorable tax rates and regulatory system. Related: The Biggest Threat To U.S. Oil Exports

Last November, the Canadian Association of Oilwell Drilling Contractors (CAODC) said in its 2018 Drilling Forecast that it expected Canadian wells drilled this year to number 6,138, up by just 107 from 2017.

“One of the Canadian oil and gas industry’s biggest hurdles continues to be lack of market access and regulatory stability,” CAODC said.

“Market access and a predictable regulatory environment are the most significant factors in creating an environment that will allow our industry to deliver stronger results in the coming years,” CAODC President Mark Scholz said back then.

Speaking to The Canadian Press, Scholz said on Tuesday that the lack of market access continued to be one of the biggest obstacles to Canadian producers to get their barrels to market at higher prices. Western Canadian Select (WCS) is currently trailing WTI prices by a discount of more than $30 a barrel.

By Tsvetana Paraskova for Oilprice.com

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  • jeet pangli on February 01 2018 said:
    it doesnt make any sense that canadian oil is that low compare to the world price per barrel.i think govt should find middle ground to support these oil prouducing provinces.Lets think for canada.
  • Andy on February 03 2018 said:
    The current political state in Canada is doing real damage to the Canadian economy and investment in the oil & gas industry in Western Canada. Federally you have prime minister, who is essentially a complete fool, pandering to extreme enviro interests with a federal carbon tax and increased federal business tax. Provincially in Alberta you have yet another unqualified fool as premier, she also prays at the Church of Global Warming and has implemented a provincial carbon tax and higher provincial business tax. The province of British Columbia blocks coastal access from Alberta and is now partially governed by the Green Party....so you can guess what has happened with almost every major pipeline project. Even federal 'approval' has been met with endless delays and attempts to block these projects by the politicians of 'California North'. Petronas finally throwing in the towel on their mega LNG project on BC coast even after it was finally 'approved' by feds....after about SEVEN years and with hundreds of environmental conditions....says it all, frankly. Canada is in very serious trouble if the current fed and provincial governments aren't ousted in 2 years....there may have been irreparable damage done already.

    It's a miracle any bits are turning at all in western Canada, but there are.

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