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Drilling forecasters at odds Two groups predict dip in Canadian drilling in 2007, but CAPP predicts gain of 2 percent Gary Park For Petroleum News
Just when it seemed there was consensus on how much drilling Canada will see in 2007, the Canadian Association of Petroleum Producers — whose 150 member companies account for 95 percent of the country’s oil and gas production — challenged the trend.
The Canadian Association of Oilwell Drilling Contractors is braced for a 15 percent decline in well completions in Western Canada; the Petroleum Services Association of Canada is betting on a 10 percent drop for all of Canada; and a host of the leading E&P companies, most of them uneasy about the cost of rigs and services, are trimming their budgets.
But CAPP is taking the high road, predicting 25,000 wells in 2007, up a modest 2 percent from this year.
David Daly, CAPP’s manager of fiscal policy, told the Petroleum Services Association of Canada’s fall conference that his association is confident commodity prices will flatten out in 2007, generating the cash flows needed to support capital spending at the same level as 2006.
In contrast to PSAC, he said CAPP is counting on a recovery in shallow gas and coalbed methane drilling.
Daly said the oil and gas industry is expected to invest C$47 billion of cap-ex in 2007, up C$2 billion from this year and making it the largest single private sector investor in Canada.
The CAPP breakdown forecasts C$33.3 billion in the Western Canada Sedimentary Basin (compared with C$32.5 billion in 2006), C$12.5 billion in the oil sands (C$11 billion), C$700 million on the East Coast offshore ($1 billion) and C$500 million in Northern Canada, unchanged from this year.
Daly said the upstream sector will pay about C$27 billion to governments this year, including income tax, land sales and royalties.
Taking a more cautious approach, PSAC expects 23,900 wells in 2007, off 1,390 from this year’s anticipated 25,290, while CAODC has set its sights on 19,023 wells in Western Canada, lagging well behind PSAC’s prediction for the region of 21,405 wells.
Producers keeping numbers under wraps PSAC President Roger Soucy said his association has experienced difficulty compiling its numbers because producers are keeping their plans under wraps, compounded by expectations of continuing price volatility.
He said forecasting is always easier “when the trend line is going either up or down.”
As one example, Soucy said coalbed methane drilling is projected at 2,000 wells, but that could be on the high side by as much as 500 wells.
PSAC expects gas wells will account for 65 percent of this year’s drilling and drop to 56 percent in 2007, while the industry is expected to spend C$18 billion on drilling and completions next year, off from an estimated C$20 billion in 2006 and 2005.
In the midst of such an uncertain environment, many of the bellwether companies are opting for safety.
EnCana has cut its projected increase in production from 8 percent to 5 percent; Devon Energy is ready to reduce activities in Canada’s conventional gas sector because of upward pressure on costs; Talisman Energy is deferring C$1 billion in proposed exploration and development spending, swayed more by the squeeze on services, manpower and equipment and less on some early hints of the pressure coming off drilling costs; and Canadian Natural Resources has chopped its gas drilling plans by 40 percent amid lower prices and “overheated” service costs, scaling back its gas wells to 423 in 2007 from 740 this year.
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