Oil and gas drilling projected to reach 10-year high, but Trump tariffs pose threat

The Northern Lights make an appearance over pumpjacks as they draw out oil and gas from well heads near Cremona, Alta., Oct. 10. THE CANADIAN PRESS/Jeff McIntosh

Canada's oil and gas well drilling sector is poised to employ more people next year than it has in a decade, but the job growth could be derailed if president-elect Donald Trump makes good on his tariffs threat.

The Canadian Association of Energy Contractors (CAOEC) — which represents drilling and service rig companies across Western Canada, as well as offshore drilling rigs in Atlantic Canada — on Friday said Trump's recent threat of 25-per-cent tariffs across the board on goods coming into the U.S. from Canada and Mexico should be taken "very seriously."

CAOEC president and CEO Mark Scholz said while his organization hasn't formally crunched the numbers, punitive tariffs would be a blow to the sector.

"I think what we do know is that there would be some impact on jobs," Scholz told reporters at an event in Calgary.

"So let's set politics aside, let's get to work because we have a serious issue at hand."

Energy sector growth

Trump's threatened tariffs come at a time when Canada's energy sector is experiencing growth. 

CAOEC expects a total of 6,604 wells to be drilled in Western Canada in 2025. That represents a 7.3 per cent increase from 2024 and would be the most activity in the Western Canadian oilpatch since the commodity price crash of 2014/15, which led to years of industry contraction.

The organization also expects the number of jobs in the sector to grow by seven per cent year over year in 2025, to 41,800.

"These represent mortgage-paying, blue-collar jobs for Canadians that will help build strong communities," Scholz said.

Driving the anticipated uptick in drilling activity is the Trans Mountain pipeline expansion, which opened earlier this year and has given Canadian oil companies increased export capacity.

Natural gas drilling is also expected to rise due to the pending startup of LNG Canada, the country's first major liquefied natural gas export facility.

Top export to U.S.

Energy products represent Canada's top export to the United States. According to Statistics Canada, 81 per cent of Canada's total crude oil production in 2023 was exported, and nearly all of that volume (97 per cent) went to the U.S.

In the days and weeks following Trump's election victory, most experts believed oil and gas would be exempt from any tariffs the new U.S. administration might propose — largely because the two countries' energy markets are so integrated that imposing tariffs on Canadian oil would drive up energy prices for U.S. consumers.

But Trump's threat this week of across-the-board tariffs on all goods has made Canada's energy sector jittery.

"What's important to communicate is there'll be an impact on the price of energy for Americans," Scholz said.

"This is an area where I think Canada needs to share that information, to reach out to our colleagues and our friends and neighbours in the United States so that they understand how mutually beneficial trade is — particularly when it comes to energy."

The CAOEC also called Friday for the federal government to abandon specific policies the oil and gas sector believes will put Canada's energy sector at a disadvantage to its U.S. competition under a Trump administration.

These policies include the proposed federal cap on greenhouse gas emissions from the oil and gas sector, as well as the federal impact assessment act and recent anti-greenwashing legislation.

Relations between Canada's energy sector and the federal government have been rocky in recent years, with the industry accusing the government of imposing a de facto production cap by setting what companies say are unrealistic and unachievable climate targets.

But Scholz said when it comes to Trump's tariffs threat, the industry and all levels of government must present a united front.

"The Prime Minister has called for a Team Canada approach on this, and we are all in," he said.

"So we're going to support the Prime Minister, we're going to support the premiers ... it's important that we get this right."

This report by The Canadian Press was first published Nov. 29, 2024.