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Alberta royalty review process adds to grim drill forecast: CAODC
VANCOUVER
Petroleumworld.com 10 31 07
Uncertainty caused by Alberta's prolonged royalty review process has
contributed to Western Canada's worst drilling forecast since 1992, with rig
utilization for 2008 falling to a "sub-economic" 34%, the Canadian Association
of Oilwell Drilling Contractors forecast Monday.Utilization rates have slipped over the past three years from 69% in 2005
to 63% in 2006 and an expected 40% this year, but have not been as low as the
2008 prediction since 1986-1992, the trade association said in a statement."The winter drilling season has been lost," it said, blaming concerns
about the royalty review, low natural gas prices, high operating costs and a
stronger Canadian dollar.It predicts 13,375 wells will be drilled in 2008, down from the record
22,298 in 2006 and an estimated 16,393 this year.The rig fleet is expected to shrink from 890 in the first quarter to 860
by the end of 2008, confirming some industry warnings that some Canadian rigs
are headed for the United States or overseas, with the utilization rate pegged
at 50% in the first quarter, 15% in the second, 30% in the third and 40% in
the final three months.Although the royalty increases announced October 25 were not factored
into CAODC's numbers, industry expectations likely contributed to the
depressed numbers because companies typically set their winter budgets in
early fall, said CAODC economic analyst Nancy Malone.As companies analyze the impact of Alberta's higher royalties and adjust
their programs, CAODC said it will issue revisions to its forecast.
CAODC based its current outlook on commodity prices of US$80/b for oil
and C$6.50/Mcf for natural gas.
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