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CAODC predicts slow 2021 for drilling sector

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After a promising start, 2020 activity levels came to a crashing halt at the end of Q1 along with the global economy due to the COVID-19 pandemic. The industry faced historic lows in oil pricing, which drove historic lows in drilling activity, with CAODC drilling contractors averaging only 17 active rigs in June.

2020 was not only the worst year on record, it was an extension of the prolonged downturn in Canada's oil and gas industry. CAODC members weathered the storm yet again by further reducing headcount and getting by on unprecedentedly low drilling and well service activity. However, the Association's registered rig fleet numbers remained relatively stable throughout the year.

Meanwhile, some gains continue to be made for Canadian oil and gas in critical areas such as pipeline infrastructure. Although the U.S. election results may have increased uncertainty regarding the Keystone XL pipeline, other projects such as the Trans Mountain Expansion, Coastal GasLink, and Alberta's NGTL pipelines have made considerable progress. These developments, combined with upward pricing forecasts for natural gas, the recovery in oil prices from 2020 lows, and the gradual introduction of the federal government's $1.7 billion grant for well reclamation, suggest 2021 activity should modestly improve from the 2020 collapse. With that said, the forecasted increase of 475 wells and 4,274 operating days still means 2021 will be the second slowest year in the industry's modern history.

"The market volatility and uncertainty will persist, and several factors hang in the balance," says CAODC President and CEO, Mark A. Scholz. "The prospects for an effective COVID-19 vaccine are promising, but the impact of the pandemic on energy demand in 2021 and access to capital for our members and their customers remain a challenge. Moreover, it is critical OPEC+ maintains supply discipline throughout these unprecedented demand shocks. Although the industry's short-term challenges endure, we continue to be bullish in the medium and long-term as the world continues to demand Canadian energy resources," says Scholz. "We will deal with what comes, whatever it may be, but next year could finally be the start of a recovery."

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