Resilient oil and gas industry will rebound
CARRIE KELLY
The oil and gas industry has seen a steady decline that's taking an incredible toll on the province and for many, the only bright light is that history shows downturns aren't permanent.
While there's no crystal ball to determine with absolute accuracy when hiring will restart in the energy sector, the short-term forecast is that the next year will continue to be difficult.
A report released by the Petroleum Labour Market Information (LMI) Division of Enform states that 58 per cent of oil and gas company respondents plan to decrease their workforce. In order to maintain staff, many workers will have to be willing to have their wages reduced, forgo bonuses and training opportunities and be willing to work fewer hours.
In 2016, reducing costs and maintaining or increasing productivity are top of mind for companies.
Carol Howes, vice president of communications and PetroLMI at Enform, said there's a need to view the markets through a longer-term lens so as not to risk setting the industry back again.
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“It may not be tomorrow, or next month, but our industry is resilient and oil and gas prices are expected to recover over the next few years,” said Howes. “As energy projects come back on stream and baby boomers continue to retire, the industry will require more workers with specialized skills to work in an increasingly complex oil and gas environment. It is important not to lose sight of longer-term skills shortages, an issue that dominated boardrooms not even two years ago.”
The Canadian Association of Oilwell Drilling Contractors (CAODC) is predicting a reduced drilling forecast for 2016 of 58 per cent from 2014 levels. Projected operating days this year is anticipated to be 56,260, down from 131,021 two years ago. The CAODC is also expecting to see a 57 per cent decrease in employment from 2014 levels, which means 28,485 fewer jobs.
It's all a result of low commodity prices, market access challenges and cumulative regulatory and taxation changes that have created an uncertain investment climate.
CAODC president Mark Scholz emphasized the depth of the current downturn. “Today, the oil and gas services industry is facing one of the most difficult economic times in a generation. The active rig count for the western Canadian rig fleet is at the same level as experienced in 1983, one of the worst periods in our history.”
Activity in the Western Canadian Sedimentary Basin (WCSB) is being particularly affected.
The CAODC stated that activity levels suggest a significant de-listing of assets by member companies. Active rig counts are down significantly in Q4 2015, with utilization rates cut in half and this trend is expected to continue throughout all four quarters in 2016, with utilization levels averaging around 22 per cent for the year. CAODC projects the number of wells drilled in 2016 at 4,728.
Activity is definitely quieter at Diamond Energy Services in Medicine Hat, an oilfield services company that provides service rigs and coiled tubing units throughout Alberta, Saskatchewan and the Rocky Mountain region
of the United States. In 2008, Diamond Energy had 23 employees in the coiled tubing sector; now it has about six.
"Right now we're all about trying to weather the storm and be creative," said Steve English, vice president of Diamond Energy Services coiled tubing division in Medicine Hat.
He was working in the industry during the economic downturn in 1982 and says this one feels worse. One solution that could really make a difference for the energy sector is getting the infrastructure — pipelines — in place to open up new markets.
"Our problem is, we can't be competitive if we can't ship our oil and natural gas out of Alberta and Saskatchewan," he said.
Peter Watson, chair and CEO of the National Energy Board, referenced that very issue in the report Canada's Energy Future 2016 (EF 2016).
"EF 2016 indicates that the development of future energy infrastructure directly impacts export prices, future production growth and the overall Canadian economy. While Canada has no influence on global commodity prices, it does have control over the ability to access new markets for our exports and receive the full value in the global market place, whatever future global prices may be," he wrote.
Market access is also a priority for the Canadian Association of Petroleum Producers. In 2016, CAPP is working toward gaining regulatory support for new infrastructure and capacity, as well as gaining public and government support by emphasizing the safety and economic benefits of transportation infrastructure.
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