Skip to content

Western Canadian Drilling trends for 2021

The effect of the COVID-19 pandemic has been profound. Basically, all industries have been affected, with some businesses being decimated by the onslaught of stay-at-home orders and health concerns.

One industry that hasn't been spared is the oil and gas industry. And the reason is simple. As fewer people travel, either by air or road, the demand for fossil fuels has gone down. And simple economics dictate that, as the demand for something goes down, so does the price. And a lower price means less revenue for producers.

But what is the effect of the pandemic on the Western Canadian drilling industry? What is the outlook for 2021? This post will shed some light on these questions in more detail.

Click here for more information about containment liners

The Effect of COVID on the Western Canada Drilling Industry

The global oil price has been increasingly volatile since the 1970s. Increasing demand in developing countries and rising supply as a result of new oil production in the US has further destabilized the price in recent years.

The pandemic has, however, lead to a massive decrease in oil with prices falling by 40% from January 2020 to May 2020. The reason for this has been twofold:

  • Containment measures and the subsequent economic downturn brought about by the pandemic lead to a slowdown of production and travel globally, leading to a significant drop in the demand for fuel.
  • Measures to curb the production of fuel during times of lessened demand have not been successfully leading to an oversupply of gas in relation to the demand for it.

So, what is the forecast for the Canadian drilling industry in 2021?

The 2021 Outlook

Oil and gas secondary containment The Canadian Association of Oilwell Drilling Contractors (CAODC) expects that 3771 wells will be drilled in 2021, up by 475 from the projected total of 3296 in 2020. In contrast, the Petroleum Services Association expects only 2600 wells to be drilled this year.

It's a vast difference that's brought about by the different ways in which these associations use to count wells, but the takeaway is that it still won't be smooth sailing for the oil industry in 2021.

This is especially worrying when considering that:

  • The CAODC's figure represents a 71% drop from the 13089 wells drilled in 2014.
  • Jobs on oil rigs have fallen from 7160 in 2014 to 1850 in 2021.
  • The Canadian drilling fleet will shrink by 27 rigs to 478, down from 628 in 2018.
  • Drilling rig operating days are expected to fall by 74% in 2021 compared to 2014.

But it's not all bad news, though. According to the latest Deloitte forecast report, there will be a return to higher demand for oil in 2021.

According to Andrew Botterill, national oil and gas leader for Deloitte Canada markets are likely to remain flat but the increase in demand due to reopening economies has led to an increase in prices. In turn, this could lead to a turnaround in the industry.

Final Thoughts

It seems to be a rocky road ahead for the Canadian drilling industry, but there appears to be some light at the end of the tunnel.

It can only be expected that as more vaccines become available and more economies reopen, that prices will show further improvement and signal the recovery the industry needs.

New call-to-action

Leave a Comment