Crude oil drilling in Canada will increase next year, the Petroleum Services Association of Canada said in a report, adding that the increase in 2018 will be moderate, to 7,900 new wells, up from 7,550 wells this year.
Alberta will account for the biggest chunk of the drilling increase, which will be the highest since 2014 and the oil price collapse. Still, the number of new wells expected to be drilled in 2018 is about a third lower than the number of new wells drilled during the year of the price crash, which, Reuters notes, highlights the slow pace of recovery in the industry.
The PSAC's 2018 drilling forecast is based on an average oil price per barrel of US$53, an average price for natural gas per million cu ft of US$1.94 (C$2.50), and an exchange rate of US$0.82 per Canadian dollar.
"Due to pressure to stay low, costs for services continue to be suppressed, affording better margins for producers. For 2018, confidence that oil will stay in the low-to-mid US$50 range as markets tighten and inventories reduce, along with growing interest in Canada's vast liquids rich natural gas, should support a 4 - 5 per cent increase in activity levels," the president of the PSAC, Mark Salkeld, said in a statement.
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In the bad news department, Salkeld noted the shelving of TransCanada's Energy East pipeline project, which, he said, has hurt the confidence of investors in Canada's energy industry. TransCanada asked in September for a 30-day suspension of its application for the Energy East pipeline that should transport crude oil from Alberta and Saskatchewan to the eastern part of Canada. According to the company, it wants to review the National Energy Board's August decision to toughen the pipeline project assessment procedure.
On the other hand, the PSAC president said that demand for Canadian oil and gas is set to grow as buyers move increasingly towards responsible oil and gas production.
By Irina Slav for Oilprice.com
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