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Upstream hope dampened by labor shortage
Gary Park For Petroleum News
The forecasts span a broad range, but they all point in the same positive direction — toward a stronger year in the Canadian upstream than has originally been forecast.
Bolstered by strengthening natural gas prices and a growing belief that the Alberta government is on the verge of rolling back its controversial royalty increases, forecasters are raising their sights for 2010 even though their revised numbers lag far behind the 2006-08 peak years.
The Petroleum Services Association of Canada has hiked its well-completion target by 12 percent from its November forecast to 9,000, with all of the 1,000 new wells assigned to Alberta; investment dealer Peters & Co. has hiked its 2010 Western Canada well-count forecast by 22 percent to 11,000 wells and expanded its capital spending estimate by 28 percent to C$15.8 billion; FirstEnergy Capital expects 12,900 well completions, up almost 4,400 from 2009, with capital spending rising by C$3.3 billion to C$24.4 billion; and BMO Capital Markets analyst Michael Mazar is forecasting 10,675 wells, compared with the 2006 record of 22,127 completions.
Although breakdowns are not provided, gas-targeted prospects usually account for about 60 percent of Canada’s total drilling.
Most of the forecasters agree that shallow gas drilling in Alberta and Saskatchewan will still be out of favor, but Mazar sees 2010 as the year the industry will start to “turn the corner” on a recovery.
Labor shortage a concern Petroleum Services Association of Canada President Roger Soucy said a drilling spurt in December and expectations of strengthening commodity prices this year are generating feelings of “cautious optimism that will continue to impact drilling levels as we move through 2010.”
But some of the hopes could be eroded by a labor shortage in Canada’s service sector.
“We’re turning jobs down that we have equipment for because we can’t hire qualified people,” said Duane Mather, president of Nabors Canada, one of the largest drilling contractors.
He said all workers who were laid off over the past two years are being called back, but the best Nabors can promise is a job for the next six to eight weeks until the spring thaw forces rigs to shut down.
Soucy said “virtually all” of his member companies have customers they are unable to satisfy.
“In most cases, they’re also hesitant to go through any major hiring because their customers are not sure this activity will continue past the spring break-up.”
What puts a more positive spin on the well counts is the increase in horizontal drilling, which extends the average time needed to complete a well from 6.5 to seven days three years ago to 11.
Mather is hopeful that trend will make 2010 the year that the industry starts to “turn the corner” on a recovery.
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