Alberta's drilling forecast shows further drop
Published Wednesday, January 27, 2016 11:31AM MST
Last Updated Wednesday, January 27, 2016 6:40PM MST
The outlook has gotten a little dimmer for Alberta's oil industry as the forecast for 2016, which had already been anticipating a drop in the number of wells drilled this year, has now dropped even further, but there is optimism in the long term.
The Petroleum Services Association of Canada (PSAC) released an update to the 2016 forecast, which was originally announced back in November.
The new numbers show that only 4,900 wells in Canada will be drilled in 2016, down about five percent from 2015's estimate.
In Alberta, PSAC estimates about 2,718 wells will be drilled, down from the original 2,733.
PSAC said it based the new forecast on a number of facts, including a natural gas price of $2.50CDN/mcf, crude oil prices around US$38/barrel, and the Canada-US exchange rate averaging $0.72.
“Factors including oversupply, North American reserves near capacity and low cash flows continue to support the ‘lower for longer’ outlook being echoed around the province and industry," said Mark Salkeid, President and CEO of PSAC in a release. "These challenging circumstances are taking their toll on the oilfield services sector just like all other sectors of the energy industry and the effects ripple across all the supporting industries. I’m afraid we are not out of the woods yet.”
Meanwhile, the National Energy Board released their projections during a meeting at the Toronto Board of Trade on Wednesday.
Chair and CEO Peter Watson released the report, which states that it's likely it will take until 2040 before crude oil gets back above US$100/barrel.
The report also found that without any additional pipeline infrastructure, the growth of oil production will be stunted.
"Canada's energy future will not be determined by a single force, but rather, the interaction of many. We need inclusive discussions about energy, the environment, infrastructure and market access. These need to be real conversations between industry, ENGOS, governments, Indigenous Peoples and other Canadians. And they need to be fed by unbiased, reliable, and accessible long-term energy analysis to support common points of understanding," Watson said in a release.
Watson says if oil prices remain lower for longer -- staying closer to US$55/barrel in 2020 and only reaching US$80/barrel by 2040 -- production will be essentially flat after 2020, plateauing at about 4.8 million barrels daily for the next 20 years.
There is also a 20 percent increase expected in Canadians' energy consumption by 2040.
(With files from the Canadian Press)