CALGARY -- The energy sector has been dealt a severe blow this year thanks to the triple-whammy of the oil price decline, slow economy and COVID-19 pandemic.

“I remember very vividly sitting in my office in middle of June, and getting a drilling report showing there were six drilling rigs working in all of Western Canada,” says Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors (CAODC).

“That’s all, out of about 500 rigs in western Canada. it was a very, very difficult time for our industry.”

By mid-November the number of working rigs has increased to 110. That is still far below what the industry has seen in the past, even during previous periods of oil price decline and economic recession.

“2020 has been the by far the worst year we have ever experienced in, really, the history of the oil patch since we've been recording the state of back since the 1970s,”said Scholz “Really, it's been a very hard year.”

Scholz points to two main factors in the drop in oilpatch activity: a price war between Saudi Arabia and Russia caused commodity prices to sink dramatically and, just as that looked to ease, COVID-19 took it’s toll on the industry, as a near-worldwide lockdown forced a drop in demand of about 30 million barrels a day. That’s approximately a 30 per cent drop.

He says a slow recovery seems to be underway, but it remains tenuous.

“I would say is there is still a tremendous amount of market volatility and uncertainty. And they really come from a number of areas. The first is what the second wave of COVID-19 is going to do on overall demand for our products and how effective the vaccine rollouts are going to be.

“The second piece is going to be OPEC+ (Organization of Petroleum Exporting Countries plus other key oil producers like Russia) ensuring supply management discipline. We need to ensure that pricing doesn't get completely out of control.”

Layoffs swept through the oilpatch this year and companies reduced spending as prices dropped. At one point in April, oil prices dipped into negative territory.

“For every rig that works in Western Canada, it generates about 200 direct and indirect jobs. Back in 2014, we had about 70,000 people working in our industry. We're projecting (for this year) about 18,000,” said Scholz. “So that difference is about 53,000 jobs. These are good paying, mortgage paying jobs, that many Western Canadians relied on.”

CAODC expects a total of 3,296 wells to have been drilled by year end and close to 3,800 through 2021.

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(Source/CAODC)

That compares with 5,545 wells drilled in 2019. While it’s an increase over this year, 2021 will see fewer wells drilled than the previous worst year, 2016, in which 4,627 wells were drilled in Canada.

“What our forecast is saying it's a gradual, modest increase from 2020. 2020 was the worst year, 2021 is going to be the second worst year, but it is moving in the right direction.”