Drilling contractors worry Trump policies will ‘temper’ Canadian recovery
Calgary – The election of Donald Trump is good news for U.S. oil and gas drillers and potentially bad news for the Canadian industry, says the head of the Canadian Association of Oilwell Drilling Contractors.
President Mark Scholz said the association’s 2017 drilling forecast released Tuesday is based on information gathered prior to the U.S. election.
He said its forecast of a 31 per cent increase in Canadian drilling next year after its least active year on record in 2016 would have been “tempered” had it known Trump was going to win.
“If I was a U.S. driller, I would be very optimistic about the prospects of greater activity in the United States,” said Scholz.
“He (Trump) has talked about lower business taxes, he has talked about reducing regulations and no doubt that is going to have an impact on our forecast on Canada’s prospects.”
Scholz added Trump’s vow to open U.S. federal lands to more drilling could lead to investment dollars diverted from Canada to the U.S., further increasing a glut of American oil and gas production which has been blamed for lower North American commodity prices.
He cited Alberta’s carbon tax scheduled to start Jan. 1 as an example of an “investment barrier” for the Canadian drilling industry that will put it at a disadvantage with U.S. rivals.
Gary Leach, president of the Explorers and Producers Association of Canada, agreed in an interview that Canada must improve its competitive footing compared with the U.S. to attract investment.
“From what we know about Trump’s agenda, we think the U.S. is now going to be a more formidable competitor to draw capital,” he said.
In a two-and-a-half minute video posted on YouTube on Monday, Trump said he intends to create jobs in the U.S. by “putting America first.”
“On energy, I will cancel job-killing restrictions on the production of American energy including shale energy and clean coal, creating many millions of high-paying jobs,” he said, without giving specifics.
He also said he would require lawmakers eliminate two regulations for every new regulation they propose.
Scholz said governments in Canada can help the industry by approving pipelines to new markets, such as the Trans Mountain to the West Coast and Energy East to Eastern Canada, to help counter a price “discount” on Canadian products in U.S. markets.
He said Trump’s vow to approve the Keystone XL pipeline would help the Canadian industry get more barrels to the U.S. Gulf Coast where they would fetch better prices.
In its forecast, CAODC said it expects 4,665 oil and gas wells will be drilled in 2017, up 31 per cent from 3,562 expected this year, but down from 11,226 wells drilled in 2014 and 5,394 in 2015.
Scholz said the average number of active drilling rigs in 2017 is to rise to 139 from 112 in 2016, allowing the industry to hire back about 3,900 people based on an average of 145 direct and indirect jobs per rig.
The resulting total employment of just over 20,000 next year would still represent a 63 per cent drop from almost 54,000 jobs in 2014, the last time world oil prices were above US$100 per barrel.
CAODC said it expects the Canadian drilling rig fleet to shrink next year to just 610 from 680 as idle older rigs are retired but not replaced. The fleet numbered 809 rigs in 2014.
Three weeks ago, the Petroleum Services Association of Canada forecast 4,175 wells will be drilled in 2017, up about six per cent from 3,950 wells this year but 63 per cent lower than the number of wells drilled in 2014.