Author Archives: prosperitysaskatchewan

Cameco CEO reassures workers, investors over mine closure

Cameco CEO reassures workers, investors over mine closure

Saskatoon / 650 CKOM
Bryn Levy
Cameco CEO reassures workers, investors over mine closure

A worker at Cameco’s uranium milling operation in Key Lake, Sask. (Cameco)

Cameco president and CEO Tim Gitzel faced questions from media and investors in a wide-ranging conference call early Thursday morning.

The call came after the company announced Wednesday it was suspending operations at its McArthur River uranium mine and its uranium milling operation at Key Lake.

The move will see more than 800 workers placed on a temporary layoff.

Gitzel said the company made the decision in the face of a stubbornly weak global market for uranium.

In 2010, uranium was selling in the $60-a-pound range. The price tanked following Japan’s Fukushima disaster in 2011, and was hovering this week around $20-a-pound.

“The message is very clear that the market does not need more uranium. Behaving in a $20 market the same way we did when uranium prices were much higher, in our opinion, is neither rational nor sustainable,” Gitzel said during prepared remarks before he took questions.

Under current conditions, Gitzel said it made more sense to draw down the company’s inventory to meet its contract obligations, noting Cameco has contracts to sell uranium above market prices for years to come.

Gitzel stressed repeatedly throughout the call that layoffs at McArthur River and Key Lake would be temporary.

He said the company would continue to provide benefits for affected workers and would top-up their Employment Insurance cheques, all as part of efforts to retain staff through the shutdowns.

“These are good, solid people. We need them. (McArthur River) is going to keep running for 20 years,” he said.

Cameco investors will also be feeling some pain amid the poor uranium market conditions, with the company slashing the dividend paid on its stock to 8 cents per share as part of efforts to maintain its cash flow and keep servicing its debts. The dividend had previously been 40 cents per share.

Gitzel said all the company’s decisions were made with a view to maintaining Cameco’s long-term health.

In particular, he said the company was protecting its investment grade from rating agencies — a designation typically given to companies with a credit rating of BBB or better.

Gitzel said those investing in Cameco would be doing so because, in the longer term, the current low market price for uranium is unsustainable, with the company sitting on some of the lowest cost-of-production mines on Earth and well-positioned to take advantage of an eventual turnaround.

Asked if Cameco would consider selling off any of its ownership stakes in its mines, Gitzel gave a forceful vote of confidence in the long-term future for the industry in Saskatchewan.

“Sale of ownership? Not a chance. We’re not looking at that at all. In fact, if some Saskatchewan assets came available that were part of the joint ventures we’re in, we would look at purchasing them.”

The McArthur River and Key Lake shutdowns were expected to take about a month to complete, with some 200 workers kept on to maintain the sites following their anticipated closures at the end of January 2018.

Gitzel said it would also take about a month to get the facilities up-and-running again.

BHP Jansen – timeline clarification

BHP says Jansen will be ‘the first mine in Canada that’s truly attractive to women’


Published on: November 9, 2017 | Last Updated: November 9, 2017 6:00 AM CST

BHP VP potash Giles Hellyer

BHP vice president of potash operations Giles Hellyer speaks in Saskatoon on Wednesday, Nov. 8, 2017. MICHELLE BERG /SASKATOON STARPHOENIX

Amid efforts to achieve a gender-balanced workforce, BHP says its massive Jansen potash mine under construction east of Saskatoon will be the first in Canada that is “truly attractive to women.”

Technology used to make the mine more efficient and cost-effective is also expected to better serve a future workforce that is 50 per cent female, said Giles Hellyer, BHP’s vice-president of potash operations.

“The traditional way we think and view mines does not have to be that way,” the 33-year BHP veteran said after addressing a North Saskatoon Business Association (NSBA) lunch event.

“The nature of the work will change, and I think it will become much, much more interesting to all people of all demographics,” Hellyer said, alluding to the low number of women working in the province’s mining industry.

That means the facility — which is expected to have a final price tag of US$14 billion — will have everything from an equal number of men’s and women’s washrooms to automated mining machines that can be controlled remotely, he said.

BHP has so far committed around US$3.8 billion to Jansen, of which US$2.6 billion is being spent to sink two kilometre-deep mine shafts and build surface infrastructure — work that is now 73 per cent complete.

Located 100 kilometres from Saskatoon, the Jansen project has been plagued with uncertainty. BHP said in August that its board won’t give the project final approval this year, and that the company could wait until markets improve, bring on a partner, or simply sell it.

In his speech to the NSBA, Hellyer emphasized that it is “not uncommon for (BHP) to take a long time to develop large projects like this one.” He said afterward that the company is committed to making the best case possible for Jansen.

Asked when it could go to the board for approval, Hellyer said: “When the timing is right — and that will be a function of when we believe the market dynamics are right and also when … we have spent the time and effort to get the project itself right for their consideration.”

BHP made its commitment to achieve gender balance by 2025 last year. Hellyer said Wednesday that women now make up 33 per cent of its Canadian workforce. By comparison, the Saskatchewan mining industry average is a little over 14 per cent.

While improving that figure won’t be without its challenges, Hellyer said making the company more inclusive is “morally and ethically the right thing to do, and it also has huge business value.”

On Trans Mountain opposition, Burnaby doesn’t have a case

Yedlin: On Trans Mountain opposition, Burnaby doesn’t have a case

Published on: November 4, 2017 | Last Updated: November 4, 2017 9:06 AM MDT

Trans Mountain pipes
Pipes are seen at the Trans Mountain facility in Edmonton, Alta., Thursday, April 6, 2017. JONATHAN HAYWARD / THE CANADIAN PRESS

When TransCanada officially announced it was abandoning the Energy East project, which would have transported 1.1 million barrels of oil per day to the East Coast, a significant amount of discussion took place in the days that followed, suggesting the pipeline quagmire could push the country toward a constitutional crisis.

That prediction took one step closer to reality last week, when Kinder Morgan Canada filed a notice of motion regarding its Trans Mountain expansion project, challenging the City of Burnaby on constitutional grounds as it seeks to block the project’s advancement by delaying the issuance of permits.

There is no way Burnaby should be doing this.

The project has received the requisite approvals — even after additional reviews and assessments — from the National Energy Board and the federal government. Since when is that not enough for the public, or other governing jurisdictions, to rely on?

It’s instructive to look at the TMX project in the context of what is going on in China.

It is a country on the move — spending billions in infrastructure to facilitate investment, development and opportunity. There might be valid disagreement about methods and process, but there is a goal and a plan; to become an economic powerhouse and eventually establish the yuan as the global reserve currency.

And in Canada, we can’t even get a pipeline built that would be important for economic growth and business investment.

No, the building of the Three Gorges Dam wasn’t pretty — but it now generates 22,400 megawatts of much-needed, clean electricity. Still, that’s only two per cent of the country’s electricity needs. That presents a huge opportunity for Canada to supply China with liquefied natural gas – but we’re stalled in that department, too.

This is all about playing for the long game, something China has figured out but Canada has long forgotten.

There is no denying the challenges in a “command and control” economy — but our system of laws, contracts and approvals should be enough to move projects, such as TMX, forward.

Burnaby, in failing to grant Trans Mountain the required permits, and which were part of the comprehensive review process that took place at the NEB and on which the federal cabinet relied, is grasping at straws, not to mention causing additional delays.

Here’s why:

Municipalities exist by virtue of provincial legislation. And there is established case law that shows when there is a conflict between federal and provincial laws, federal law takes precedence.

The notice of motion submitted by Trans Mountain to the NEB late last month refers to a B.C. Supreme Court ruling in 2016, which stated provincial governments must issue provincially required permits that are necessary to carry out a federal undertaking; failure to do so conflicts with a federal purpose.

And the NEB has jurisdiction to act on behalf of the federal government by virtue of the NEB Act.

It doesn’t get more complicated than that.

The mayor of Burnaby likes hyperbole.

When there were protests against Kinder Morgan conducting geotechnical tests it had been ordered to do, the mayor famously said, “This is war.” The citizens of Syria and Iraq know what war means — Derek Corrigan does not.

When Kinder Morgan Canada chief executive Ian Anderson paid Corrigan a visit last week, the response was that he was being bullied by Anderson.

While Corrigan can technically say Burnaby has not turned down the requests for permits, because it hasn’t, the fact Kinder Morgan has been waiting 22 weeks compared with the standard six-week timeframe clearly suggests the city is obfuscating.

Missing is the understanding that when a project is approved, it includes both approval for the project itself and the timing; they are not mutually exclusive.

As stated in the notice of motion, and supported by prior Supreme Court rulings at both the provincial and national level, “A municipality cannot lawfully deny a permit application for a federal undertaking … allow them to manoeuvre out of their duty to issue permit by imposing unreasonable requirements and delays allows them to impair the core of the federal authority thereby doing indirectly what they cannot do directly ….

“Burnaby is improperly exercising control over whether and when the project (TMX) will proceed. The timing of the project was clearly a part of the public interest determination. This amounts to an unconstitutional exercise of its power.”

As Premier Rachel Notley said this week, when the Alberta government announced it would be intervening at the NEB to force Burnaby to issue the requisite permits to Kinder Morgan, one jurisdiction – and a municipal one at that – has no right to obstruct the construction of a project this important to the country.

But it gets better, because Burnaby and its mayor appear to be suffering from amnesia.

When Kinder Morgan was prevented from carrying out its geotechnical work in 2014, it took similar action: submitted a notice of motion to the NEB seeking an order for Burnaby to allow the geotechnical work to proceed. Then, like now, it included notice of a constitutional question.

The NEB ruled in favour of Kinder Morgan. The work took place.

All this calls into question the response by former justice Thomas Berger submitted this week. Berger is seeking to dismiss the Kinder Morgan request for the timely issuance of permits – but in doing so is blatantly ignoring the fact the timing of the project was part of the national interest determination; Kinder Morgan is seeking certainty of process. One could argue Berger is the reason we have been hamstrung on pipelines since his 1977 report that effectively killed the Mackenzie Valley pipeline.

A constitutional crisis triggered by a pipeline? Sadly, it’s entirely in the realm of possibility.

Deborah Yedlin is a Calgary Herald columnist.




Agrium sells U.S. plants to ease Potash merger concerns


Agrium Corporate Office in Calgary, Alta.

Canadian fertilizer producer and farm supplier Agrium Inc said on Tuesday it will sell its Idaho phosphate production facility for $100-million to fertilizer company Itafos, to address concerns of U.S. regulators about its merger with Potash Corp of Saskatchewan.

Separately, Agrium will sell its North Bend, Ohio, nitric acid plant to a subsidiary of Trammo Inc for an undisclosed price.

The combination of Agrium and Potash Corp is expected to close by year-end, and requires U.S. approval. Agrium did not specify what concerns U.S. regulators have, but Potash is already one of the biggest U.S. phosphate producers.

Earlier on Tuesday, China’s commerce ministry said it has approved the merger on the condition that Potash divest certain stakes in other companies.

Agrium’s U.S. listed shares fell 1.7 per cent to $106.01.

Under the deal, Itafos gets Agrium’s Conda, Idaho, phosphate production plant and adjacent mineral rights. The deal includes an agreement for Agrium to supply ammonia to the Conda facility and buy the monoammonium phosphate it produces.

Agrium said it will take a $178-million impairment charge on the Conda sale and retain its historic environmental obligations.

Agrium’s sales to both Itafos and Trammo are subject to approval by the U.S. Federal Trade Commission, the company said.

The merger combines Potash Corp’s fertilizer production capacity, the world’s largest, with Agrium’s network of farm supply stores, the biggest in the United States.

Hot oil markets ignite speculation around Cenovus deal – in Weyburn SK for $1-billion or more

Hot oil markets ignite speculation around Cenovus deal

CENOVUS ceo Nov 2017
Last week, departing Cenovus CEO Brian Ferguson, shown in this file photo, would not say when asked how many parties have looked at the property.




NOVEMBER 6, 2017


Cenovus Energy Inc. is expected to announce a deal shortly to sell its interest in a major Saskatchewan oil project just as surging crude prices rekindle industry interest in attractive energy properties.

The Weyburn project, with a price tag estimated at $1-billion or more, is the last of four large assets Cenovus had earmarked for sale to reduce debt taken on to fund its acquisition earlier this year of ConocoPhillips Co.’s Alberta oil sands and natural gas assets.

Several companies that have their production skewed to oil, rather than natural gas, are thought to be possible bidders for the assets – some as sole entities and others in partnerships with private-equity sources or pension funds.

Such investors covet the long-term, steady returns and low rate of production declines that the enhanced oil project delivers.

A 16-per-cent rise in U.S. oil prices over the past month is seen as supportive to potential buyers and their financing plans.

Deal interest is said to be picking up as oil prices climb to more than two-year highs amid a string of high-profile arrests in Saudi Arabia over the past weekend in an anti-corruption crackdown, and as markets tighten.

West Texas intermediate cruce closed up 3 per cent on Monday at $57.35 (U.S.) a barrel.

An improving oil market could open up capital markets for the oil patch, allowing financing for deals, after months of being out of favour.

Spartan Energy Corp. and Whitecap Resources Inc. have both been rumoured as bidders for Weyburn, though such a deal would be a big undertaking, especially for the former, whose market capitalization is about $1.2-billion (Canadian).

Spartan did not respond to a request for comment on Monday. It gained an ownership interest in Weyburn last year as part of a $700-million acquisition of oil assets from ARC Resources Ltd.

For its part, Whitecap, with a market cap of about $3.6-billion, is one of few companies to have successfully raised large sums in equity issues during the downturn. Whitecap chief executive officer Grant Fagerheim did not respond to a request for comment.

On Monday, GMP FirstEnergy analyst Michael Dunn speculated that Husky Energy Inc., with $2-billion of cash in hand and a strong balance sheet following its own asset sales, could also be in the running. A Husky spokesman declined to comment.

Cona Resources Ltd., led by former investment banker Adam Waterous, is also said to have made it to the final stages of bidding.

The Weyburn project, located in southeastern Saskatchewan, produces about 24,000 barrels of oil a day, with the aid of carbon dioxide that is piped in from North Dakota. It is known as the world’s largest CO2 capture-and-utilization storage project. Cenovus is operator and has a 62-per-cent stake in the complex venture, and its share of output is around 15,000 barrels a day. Several analysts have pegged the interest’s value at $1-billion or more.

Last week, Brian Ferguson, Cenovus’s departing CEO, would not say when asked how many parties have looked at the property. But he described the sales process as very competitive. Bids were due in mid-October and industry sources said the company was in talks with the winning bidder.

“It’s a very attractive asset,” Mr. Ferguson told analysts on a conference call. “And all the parties that are in the process I would characterize as substantive parties that are well-financed.”

The company has said it is targeting a deal to be announced by the end of this year. Spokesman Brett Harris declined to say Monday if an agreement is imminent.

So far, Cenovus has garnered $2.8-billion from sales of its Pelican Lake, Suffield and Palliser oil-and-gas properties, helping to rebuild investor confidence, which took a hit following the $17.7-billion ConocoPhillips deal owing to the sudden build-up of debt.

Mr. Ferguson was replaced as chief executive of Cenovus on Monday by Alex Pourbaix, a onetime TransCanada Corp. executive. Despite the leadership change, executives indicated last week that a strategic pivot was not on tap.

Still, the company is likely to put more assets on the block to meet its targeted range of $4-billion to $5-billion in sales by the end of the year. It plans to unveil its budget for 2018 in December, while also providing more detail around potential asset sales in the Deep Basin region of Alberta.

China commerce ministry conditionally approves Potash-Agrium merge

NOVEMBER 6, 2017 / 9:19 PM

China commerce ministry conditionally approves Potash-Agrium merger

Reuters Staff

 Nutrien logo - merger of PotashCorp and Agrium

BEIJING (Reuters) – China’s commerce ministry said on Tuesday it has granted conditional regulatory approval to the proposed $25 billion merger between fertilizer companies Agrium Inc (AGU.TO) and Potash Corp of Saskatchewan Inc PTO.TO.

The ministry, in a statement, said the merged entity should divest some assets including those in Israel and Chile. The merged entity also cannot acquire stakes in industry competitors for five years without regulatory approval, it added.

Reporting by Beijing Monitoring Desk; Editing by Kenneth Maxwell


Saskatchewan Attorney General Intervenes in Trans Mountain Pipeline Proceedings

Attorney General Intervenes in Trans Mountain Pipeline Proceedings

Released on November 3, 2017

Government of Saskatchewan logo

The Attorney General of Saskatchewan, concerned a British Columbia municipality is holding up a project that would create thousands of jobs for Canadians, has applied for intervenor status in the Trans Mountain Pipeline proceedings currently before the National Energy Board.

“We are disappointed the City of Burnaby is deliberately slowing down an important project for an industry that is only now recovering from the severe slowdown caused by low oil prices,” Justice Minister and Attorney General Don Morgan said.  “Saskatchewan has consistently taken the position that once an interprovincial pipeline has been approved by the federal government, provinces and municipalities should not be able to interfere.”

On October 26, 2017, the law firm representing Trans Mountain Pipeline filed a Notice of Motion and Constitutional Question with the National Energy Board, and served it on all Canadian Attorneys General.  The Constitutional Question alleges that the City of Burnaby has refused to issue permits to Trans Mountain that are required under its zoning bylaw and tree bylaw and that this has resulted in unreasonable delays in completing the project.

The pipeline is clearly an interprovincial project that falls under federal jurisdiction by virtue of The Constitution Act, 1867. Trans Mountain has asked that written submissions on this issue be provided to the National Energy Board by Monday, November 6, 2017.  Saskatchewan has asked the board for an extension on this.

“Our government will continue to advocate for an expansion of pipeline capacity across Canada,” Morgan said.  “Our energy companies need to get their product to tidewater to ensure they receive the best price possible.  All Canadians benefit from a thriving energy sector, including the citizens of Burnaby.”


For more information, contact:

Drew Wilby
Phone: 306-787-5883

NWT premier says ‘offensive and patronizing’ for southern Canadians to call shots on northern oil and gas development

NWT premier says ‘offensive and patronizing’ for southern Canadians to call shots on northern oil and gas development

 By The Canadian Press

OTTAWA — Northwest Territories Premier Robert McLeod says it is offensive and patronizing for southern Canadians to tell northerners they can’t benefit from oil and gas development because it’s time to save the planet.

McLeod is in Ottawa this week hoping to start a national debate about the future of the North, a year after Prime Minister Justin Trudeau announced at least a five-year ban on new oil and gas development in the Arctic because an oil spill in the region would be “cataclysmic.”

McLeod has criticized the decision as one-sided and ill-informed from the start and says, with that one decision, “everything we have built is in jeopardy.”

This week, he said southern Canada has benefited for years from resource development that polluted the air and is causing the North significant environmental grief and yet it now wants to tell the territories they can’t develop their own fossil fuels while the South keeps pumping out oil and gas.

“The rest of Canada needs to realize we have people that live in the North as well with dreams and aspirations and hope for a better future and we shouldn’t be penalized because of where we live,” he said.

“We shouldn’t have to stop our own development so the rest of Canada can feel better.”

McLeod said pollution from decades of developing oil and gas reserves in places like Alberta and British Columbia and the ensuing pollution from burning those fuels to drive cars and heat homes, has wreaked havoc on the North. The Bathurst caribou herds 15 years ago were over a million strong and the latest count has them at less than 20,000, which means almost no hunting happens anymore.

Permafrost is melting, affecting roads and buildings and rivers. The Beaufort Sea used to be ice-free for just five weeks a year, said McLeod and now it’s ice-free for more than three times that, causing coastal erosion and more storms. Forest fires are more common and more devastating.

McLeod said $2.6 billion in planned investments in offshore exploration disappeared with the onset of Trudeau’s moratorium and yet Canada hasn’t come to the table with any aid to replace that.

He said welfare rolls grew in the time since and the population is declining as young people in particular head south to find jobs that don’t exist in the Northwest Territories.

Resources and the energy sector account for about 40 per cent of the economy of the Northwest Territories.

McLeod said climate change has changed how the North lives and northerners deserve to be able to develop their resources if they can prove it can be done sustainably. Instead Alberta will continue to increase its oil production and the North has to sit it out without even getting a chance to be part of the discussion.

“We need jobs. We need work. You want us to leave the North because we can’t work there. You want us to live in a large park. That’s essentially what’s happened.”

Oil tanker ban: Bill C-48 and environmental hypocrisy

Kinder Morgan tanker at terminal

The House of Commons Standing Committee on Transport, Infrastructure and Communities is reviewing Bill C-48, the Oil Tanker Moratorium Act.

This Act would ban tankers carrying more than 12,500 tonnes (about 90,000 barrels) of crude oil or persistent oils (things such as fuel oils, partly upgraded bitumen, synthetic crude oils and No. 6 bunker fuel) from stopping, loading and unloading at any ports along B.C.’s north coast.

There is no similar ban on any oil tanker traffic along any of Canada’s other coastlines. Even on the West Coast, more than 95 per cent of tanker traffic carrying crude and other persistent oils happens along the southern part of B.C.’s coast – not the north.

This proposed ban is loaded with hypocrisy.

In acting for all Canadians – as it should – the committee must ask some basic questions.

Why a ban on specific tanker traffic along a specific section of Canada’s West Coast, when there are no similar bans on any traffic along any other Canadian coastline? What differentiates the northern West Coast from other Canadian shores? For example, both the north and south sides of the entire St. Lawrence River, where tankers travel regularly to bring oil from Saudi Arabia, Algeria and Nigeria? Is it because that oil means important jobs for refinery workers in Montreal, Sarnia and Quebec City?

What of the coastline of New Brunswick, along which oil tankers travel regularly to deliver oil from Saudi Arabia ($1.6-billion worth last year alone) to the Irving Oil refinery? Ah yes – much-needed jobs in New Brunswick.

How about the ruggedly beautiful coast of Newfoundland, with significant oil rigs operating offshore? Of course – they have meant the difference between poverty and prosperity for many Newfoundlanders.

Consider Vancouver – it is a bustling city, but why is it any less deserving of environmental protection than any other part of the coastline? There is wildlife, there are residents and there is tourism, all of which would be affected by a spill. Except that the city of Vancouver would not exist as it is without being a major port. As for Vancouver Island, including Victoria, all of the gas, oil and other fuels used by the people there – who elected all three of B.C.’s Green Party MLAs – get there by barge.

The northern West Coast is beautiful and pristine, but it does not have a monopoly on either of those qualities. All of Canada’s coastlines, ocean as well as inland waterways, deserve protection, which is why we must do all we can to mitigate risks and invest in oil spill containment and remediation. But with all of our other coastlines, we recognize the need for marine transportation, without which our economy, and our society, would not exist as it does.

The federal government’s commitment to spend $1.5-billion on an ocean protection plan is a big step in this direction. We have a responsibility to all of our shorelines. But we also have a responsibility to ensure Canadian economic prosperity, and to ensure fairness across the country.

The main problem with this ban is that it would prevent Canadian oil from getting to Asian markets via, for example, the deep-water ports of Kitimat or Prince Rupert – and thus directly hurt the Albertan economy and Alberta jobs. It is, in large measure, the work of an anti-oil sands lobby run amok.

If we really want to be honest, and fair, about addressing the environmental concerns around an oil spill, anywhere on Canada’s coastlines, we have two choices:

1. Ban all shipping traffic along all of Canada’s coasts. After all, the greater likelihood of a spill comes not from the now-required double or triple-hulled tankers, but from ships travelling these routes with fuel in their bunkers and their bilges.

2. Acknowledge that marine transportation is critical to our economic prosperity, across the country – but develop and implement the best ways to prevent spills, to contain them, and to clean up when they do happen – because one can never guarantee 100 per cent no risk.

The first option, a total ban on shipping, is clearly not possible. Canada’s economy would grind to a halt.

But we must not pick and choose where and when we exercise our environmental conscience – particularly when doing so favours jobs in some parts of the country but kills others. Notwithstanding incredible developments in energy technology and renewables, the world will continue to need oil for at least several decades to come. Why prevent Canada from selling what we have to the world – a concept that built this country with every other resource we are blessed with?

The irony is that Canadian oil is now being produced with less GHG emissions per barrel than some that we import, and with much more stringent labour and other environmental regulations. On that basis alone, we should be encouraging the sale of Canadian oil to the world, not discouraging it.

So let’s focus, not on a politically motivated and selective ban that will unfairly hurt some Canadians, but on how to ensure the best environmental protection on all of Canada’s equally deserving coasts while ensuring our economic prosperity.

Martha Hall Findlay is President and CEO of the Canada West Foundation.

Growing interest in Canada’s liquids-rich natural gas helps bump up 2018 drilling forecast

Oh, and WTI is over $55/barrel this morning – the highest we’ve seen in over 2-years.


Growing interest in Canada’s liquids-rich natural gas helps bump up 2018 drilling forecast

By Deborah Jaremko|

Oct. 31, 2017, 5:10 p.m.

mark salkeld

PSAC president Mark Salkeld. Image: Pipeline News

The cautious optimism and uptick in activity that led two increases in Canada’s drilling forecast for 2017 is carrying through to 2018, according to the Petroleum Services Association of Canada (PSAC).

PSAC released its projections for next year on Tuesday, forecasting a total of 7,900 wells to be drilled in Canada in 2018 compared to its revised estimate of 7,550 wells for 2017.

The 2018 forecast is based on crude oil prices of US$53/barrel (WTI), average natural gas prices of C$2.50/mcf (AECO), and the Canadian dollar averaging US$0.82.

“Budgets set with initial optimism for a gradual climb in prices by year-end continue with their plans as drilling and completion efficiencies improve,” PSAC president Mark Salkeld said in a statement.

“Due to pressure to stay low, costs for services continue to be suppressed, affording better margins for producers. For 2018, confidence that oil will stay in the low-to-mid US$50 range as markets tighten and inventories reduce, along with growing interest in Canada’s vast liquids rich natural gas, should support a 4 – 5 per cent increase in activity levels.”

PSAC noted that while activity is expected to increase next year, it will still be down about 30 percent from 2014.

“The cancellation of TransCanada’s Energy East pipeline is another blow to investor confidence in Canada and so PSAC will continue to advocate hard for market access and a competitive environment,” Salkeld said.

“The world’s energy needs are growing and polls show that countries would prefer Canadian oil and gas that is responsibly-developed and working to reduce carbon emissions through innovation.”

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