Canadian officials believe 1990 will mark the beginning of an upturn for their industry.
Industry groups say operators are budgeting for an average crude oil price of $18.50 (U.S.)/bbl. Natural gas sales will remain strong, although prices will be weak and there will be inadequate pipeline capacity for gas exports to the U.S. Average gas prices are expected to increase by 50 to $1.65/Mcf as a result of tighter North American supplies.
The Canadian Petroleum Association and Independent Petroleum Association of Canada, representing most companies in the industry, forecast increased activity this year.
CPA predicted exploration and development spending will increase 10-15% from 1989 levels to about $6.3 billion (Canadian).
IPAC said companies will drill about 6,500 wells in 1990, up about 13% from the depressed 1989 level. Canada's drilling industry had about a 30% rig utilization rate in 1989.
CPA Chairman Bart Rombough said the long term future of the Canadian industry probably lies in natural gas, oil sands, and frontier development.
IPAC Chairman Ron Cargo said increased operating costs and a slight decrease in revenue will reduce energy industry cash flows.
"Natural gas price deterioration, high interest rates, and a strong Canadian dollar continue to exert a negative influence on the business," Cargo said.
He also said reduced interest by large firms in drilling for smaller reserves in western Canada opens new opportunities for independents.
ALBERTA PRODUCTION
Meanwhile, a spokesman for the Alberta Energy Resources Conservation Board said the province, Canada's No. 1 oil and gas producer, is falling behind in efforts to maintain crude oil production.
ERCB Vice Chairman Norm Strom said conventional oil production is dropping, and plans to replace it with oil sands and heavy oil reserves are lagging.
ERCB expects Alberta production to drop 40%, or about 630,000 b/d, in the next 10 years. Slumps in oil sands and heavy oil development mean the gap won't be closed.
ERCB estimates $2-4 billion/year is needed in oil sands and heavy oil development, but spending has amounted to only $300-500 million/year.
Strom said investment could revive toward the end of this decade if higher, stable prices persuade companies to invest.
He said prices now are too shaky and indifferent for companies to make the needed investments.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.
