The Petroleum Services Association of Canada (PSAC) has upped its 2017 Canadian Drilling Activity Forecast to 7,200 wells drilled, an increase from 6,680. The forecast is based on average natural gas prices of CAN$2.75 per thousand cubic feet, crude oil prices of US$49.00/barrel and a Canada-US exchange rate averaging 77 cents. PSAC is an association that represents the service, supply and manufacturing sectors within the upstream petroleum industry.
Second quarter drilling outperformed PSAC’s forecast in part because of the quick shift of investment away from oil sands (which have a long payback period) and toward liquid-rich natural gas and light tight oil, which offer a much quicker return, according to PSAC President and CEO Mark Salkeld. The services sector also cut its costs in response to demand from customers, allowing more wells to be drilled.
However, the lack of access to tidewater and the poor public appetite for pipelines likely mean that Canada will continue to struggle to find its place in the world of energy supply, says Salkeld. The decision in July 2017 by Petronas to shelve the Pacific NorthWest LNG project is another sign that investors see better opportunities for return on their capital elsewhere.