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Canadian oil drillers face uphill battle in 2017, industry group says

After two years of sharp drops in business, the Canadian oil drilling industry expects a small increase in business in 2017.

Companies will drill 31 per cent more wells next year, according to a new forecast released Tuesday by the Canadian Association of Oilwell Drilling Contractors.

There is some hiring in the industry as the increase in drilling next year could lead to up to 3,000 more direct and indirect jobs.

There is optimism, but the organization said the Canadian oil and gas industry faces an uphill battle

“We have to be very cautious in how excited we become. We certainly have seen movement in commodity prices, which is absolutely required in order to see this industry recover,” said Mark Scholz, president of CAODC. “There are a lot of barriers for Canada.”

Scholz suggested the industry needs more oil export pipelines and fewer environmental costs such as a carbon tax.

The industry has a long way to go in its recovery from the oil price downturn, since the number of wells expected to be drilled next year is still 58 per cent lower than in 2014. 

2016 is proving to be one of the worst years on record for the CAODC especially in April and May, when the drilling rig utilization rates were around five to six per cent. 

CAODC 2017 drilling forecast

The drilling association’s latest forecast calls for an increase in activity in next year. (CAODC 2017 forecast)

The CAODC’s membership has largely stayed intact with only one drilling contractor and two well service companies going bankrupt this year.

“It’s really demonstrating the resiliency of a lot of companies that have managed to survive in an incredibly difficult time,” said Scholz.

Trump factor

The CAODC put together its forecast before the American election earlier this month, which could impact the oil and gas industry on both sides of the border. While Donald Trump has yet to be sworn in as president, he is regarded as a supporter of the business community and the oil industry, in particular. 

Mark Scholz speculates what Donald Trump will mean for the Canadian oil industry1:01

Trump has stated he supports construction of the Keystone XL pipeline from Alberta to the American Gulf Coast. However, he could attract more investment from oil companies to the U.S. 

“If I was a U.S. driller, I would be very optimistic about the prospects of greater activity in the United States,” said Scholz.

New technology 

During the downturn, the oil and gas industry as a whole has tried to cut costs and use new technology to find savings.

“The types of rigs that will be in demand in this new environment will be highly specialized to drill manufactured wells,” said Brian Krausert, CEO of Beaver Drilling, in a statement. “The rigs of the future will drill wells faster, more efficiently and with more consistency while reducing risk.”

The forecast is similar to the one released earlier this month by the Petroleum Services Association of Canada, which also expects a slight increase in activity.