The association's 2011 Canadian Drilling Forecast July Update predicts 660 wells to be drilled in the province this year, up two per cent from 649 wells last year. It predicts a much stronger position for the local industry than in the last update in April, which projected the province would see a 15 per cent decline in drilling to 554 wells this year.
"It caught us by surprise too," said Mark Salkeld, president and CEO of PSAC, representing over 255 member companies nationwide in the petroleum service, supply and manufacturing sectors. "Our thinking was with natural gas prices dropping, the incentive wasn't there, and with the Montney and Horn River in particular, our thinking was they are remote and maybe not the best economically. Much to our surprise, it looks like with well-established and developing infrastructure, the economics were right and the producers just kept on going drilling their gas wells."
That is despite natural gas prices remaining low at around $3.75 (Cdn.) per million cubic feet, and in spite of the recent flooding experienced in the Peace region and much of Western Canada more broadly.
Salkeld said there is no doubt producer companies are looking ahead to the potential to export liquified natural gas (LNG) to energy-hungry Asian markets, where the price is much more lucrative.
"I think its forward-thinking on the part of the producers, which helps us in the service sector. Canada needs another outlet – we need more than one trading partner, and right now based on LNG prices in other parts of the world, we're losing money."
He said directional drilling with multi-stage fracing (hydraulic fracturing) continues to be a larger portion of the total drilling activity in northeast British Columbia. He said that may result in a trend towards fewer wells needed to deliver increased production, but that's not necessarily bad news for service companies.
"There may be less wells, but we will have drilled farther and deeper, and the wells will be more complex and require more services in regards to directional drilling, fracing fluids and pumping services – the whole completion side of the well."
Salkeld said the time required to complete a well will be one set of data they will compile into a comprehensive year-end report later in the fall.
PSAC is predicting a 10 per cent increase in the number of wells drilled in total across Canada to 13,325 wells this year compared 12,114 last year, up from Aprils forecast of 12,950 wells or a seven per cent increase. The greatest increases in well counts are expected to take place in Saskatchewan with 3,273 wells, an increase of 17 per cent over 2010 numbers, and Manitoba with 590 wells, a 14 per cent increase over last year. Those increases are being driven by oil production, bolstered by a crude oil price at about $99 (U.S.) a barrel.
Salkeld said with continued advances in new technologies and improved efficiencies and productivity, the future looks optimistic for the countrys petroleum industry.
"It's a very good outlook for oil without a doubt, and gas down the line as eventually prices are going to come around."