PSAC releases optimistic forecast showing 16 percent increase in 2022 drilling activity
The Petroleum Services Association of Canada (PSAC) has released its 2022 Canadian Oilfield Services Activity Forecast, showing that the organization expects a total of 5,400 wells (rig releases) to be drilled in Canada in 2022. The Association is also lifting its 2021 forecast due to improved activity in the second half of the year.
"For 2022 we expect drilling activity to be higher than 2019. But, although we'll be back to pre-COVID levels, we're not going to be near where we were pre-downturn," says PSAC's President and Chief Executive Officer, Gurpreet Lail.
Lail points out, "Global supply-demand imbalances are leading to higher commodity prices, and we expect drilling activity to increase out of necessity. However, at the same time, we're also seeing a severe labour shortage, which has the potential to impact how much growth the industry can achieve in the coming year."
The final revised forecast for 2021 predicts a yearly total of 4,650 wells drilled. PSAC based its final 2021 forecast on average natural gas prices of $3.60 CDN/mcf (AECO), crude oil prices of US$67/barrel (WTI), and the Canadian dollar averaging $0.80USD. PSAC's forecast for 2022 has the WTI price at an average at $70/barrel, and AECO natural gas average at $4.10 CDN/mcf.
"Although the activity outlook is brighter than a year ago, exploration and production (E&P) companies are not deviating from strict capital discipline and are staying the course on preferring share buybacks, paying down debt, and increasing or issuing dividends," says Lail.
On a provincial basis, PSAC estimates the following drilling activity for 2022:
- 3,125 wells in Alberta, representing a year-over-year increase of 450;
- 1,495 wells for Saskatchewan, an increase of 198 wells;
- 605 wells in British Columbia, a year-over-year increase of 79 wells from 526 drilled in 2021;
- 160 wells drilled in Manitoba, up 21 wells from the 139 drilled in 2021; and
- 15 wells expected for Eastern Canada, up from 13 wells the previous year.
Similar to 2021, the majority of activity is expected to occur in the Montney and Viking formations.
"The pandemic brought an extraordinary level of challenge to an already tense industry environment," says Lail. "Through this difficult time, PSAC members supported our industry partners to produce essential oil and gas products. Those products warmed and brightened our homes - and our home offices -- and enabled the manufacture of the many products that kept our hospitals, health care workers, and all Canadians safe."
PSAC and its members know that Canada can be a world leader in responsible energy development.
"For decades, companies within our sector have made huge investments to advance innovation for sustainable oil and gas development, including lower GHG emissions," says Lail. "However, the point of view that hydrocarbons can't be any part of a sustainable future - even with responsible production and new carbon technologies - is a major setback for Canada and for our industry."
To ensure Canadians get the benefit from our oil and gas resources, PSAC calls on all levels of government to come up with coherent policy approaches. And that includes clear policies to advance opportunities in carbon capture, utilization and storage, and policies for commercial development of blue hydrogen from natural gas.