Sky-high oil prices are not necessarily the only driving factor for the industry’s service sector.
Only 30 per cent of the wells being drilled right now are being affected by the price of oil, says Roger Soucy, president of the Petroleum Services Association of Canada.
“The other side of the coin is that natural gas accounts for 70 per cent of the wells that are currently being drilled,” says Soucy. “There is more gas around Western Canada than there is oil in the conventional industry.”
An increase in the number of rigs the industry expects to run in the first quarter of 2005 – about 613, six per cent higher than in the same period in 2004, according to the Canadian Association of Oilwell Drilling Contractors (CAODC) – reflects very much on high commodity prices.
“To be very specific about this, most of these wells are gas wells,” says CAODC president Don Herring. “There’s a big focus on gas and that will continue.”
“Natural gas prices are relatively high, and more importantly the Western Sedimentary Basin is gas prone. And we’re next door to the biggest gas-consuming country in the world.”
CAODC’s forecast calls for natural gas prices at $6.12 US per thousand cubic feet (mcf), an increase of 15.5 per cent above the previous year’s forecast of about $5.30 mcf.
Oil price spikes can also translate into more demand for natural gas, industry insiders say.
“People (and companies) switch back and forth when oil is high,” says Brian Banks, vice-president of Nisku-based Jade Drilling Inc.
