The Petroleum Services Association of Canada (PSAC) says that the recent federal election had an “unrelenting focus on climate action” that created uncertainty in the oilpatch and will continue to drag oil and gas drilling activity down.
In its 2020 Canadian Oilfield Services Activity Forecast, released on Thursday, the Calgary-based industry group predicting that 4,500 wells will be drilled in Canada in 2020. That’s 500 fewer than PSAC’s final revised forecast for 2019, according to CBC Canada.
“Following a very disappointing 2019 that saw activity plunge to 2015/2016 levels with about 2,000 fewer wells drilled than forecast, the outlook for 2020 is even worse,” said PSAC president and CEO Gary Mar in a release.
Some of the reasons for this glum outlook is that producers are spending their cash on buying back their own shares, paying dividends and reducing debt rather than investing in growing production. Yet the bottom line in all this is whether the federal government will push ahead on pipeline construction?
And again, Mar notes that the Liberal minority government is going to have to look for support with parties that are hostile to the oil and gas industry.
NIMBY’s to NOPE
But let’s go back to the pipeline issue. “The debate is still very hot around the need to have more pipelines,” said Canadian Energy Pipeline Association president and CEO Chris Bloomer as his industry group of pipeline companies released its annual report card on pipeline spills in the country, according to the Financial Post.
As Digital Journal noted on October 20, there was a lot more than voters realized riding on the federal election. The big fear was that Prime Minister Trudeau’s Liberal party would get the most votes but would only be able to form a minority government. And that is exactly what happened.
Now, the oil and gas industry and the pipeline industry are bogged down with worry – wondering what’s going to happen to the oilpatch, in general, and the much-needed pipelines, in particular.
The pipeline issue in Canada has moved from one focused on whether they are safer than moving on railway cars to one focused on climate change. “The industry needs to change the way it addresses the polarization,” Bloomer said. And this brings up the way opponents of pipelines are described – They are known as “NIMBY’s,” NIMBY is an acronym meaning “not in my back yard.”
Ed Whittingham, a Calgary-based environmentalist and former head of the Pembina Institute think-tank, says “While Albertans and Alberta companies are doing their best to drive down the environmental intensity, it’s still a challenging way of producing energy.”
“It’s high-cost and high-carbon at a time when the world is going toward low-cost and low-carbon sources of oil. And that’s an inescapable fact.”
Bloomer said that now, groups opposing pipelines are described with a new acronym, NOPE — which means ‘not on planet Earth.” He adds, “We need this industry to grow and that’s where the rub comes.”
The Canadian Association of Petroleum Producers’ latest forecast projects the domestic oil industry will produce 5.86 million barrels of oil per day in 2035, up from 4.6 million bpd in 2018. This may be a modest prediction, but we have to keep in mind that right now, Canadian oil producers pump more oil than can fit into the current pipeline network.
With oil and shale gas prices down right now, major oil companies are posting huge decreases in third-quarter earnings. The big question now is will the minority Liberal government get the backing to push for completion of the pipelines?
