Energy industry sees modest rebound in activity after seven years of stagnation

The Canadian Association of Energy Contractors is forecasting a 15-per-cent bump in overall activity next year, but the industry continues to face challenges when it comes to crewing rigs and retaining workers.Todd Korol/Tausi Insider

Canada’s energy services sector is forecasting a modest turnaround in activity next year after seven years of stagnation, but continues to face challenges when it comes to crewing rigs and retaining workers.

As the country ramps up efforts to lower greenhouse gas emissions, the Canadian Association of Energy Contractors (CAOEC) is calling for a 50-per-cent federal tax credit to help the industry roll out greener rigs and other technology to help reduce its carbon footprint.

While oil and gas producers have enjoyed windfall profits this year thanks to sky-high commodity prices, the services sector that supports the industry is lagging behind. Far from the highs of 2014, president and chief executive of CAOEC Mark Scholz says, most of his members – the workhorses of the energy industry, such as contractors who do the actual drilling, fracking and other jobs for oil companies – are not yet profitable or sustainable.

Still, he said, “there’s a light at the end of the tunnel.”

The association forecasts a 15-per-cent bump in overall activity next year, including 6,400 wells being drilled and 5,400 or so extra jobs added to the work force.

By the end of this year, CAOEC estimates total operating days will hit just over 61,404 – a 40-per-cent increase compared with 2021. It expects total jobs will also be up 40 per cent year-over-year, though they sit well below the highs of 2014 when employment in the sector hit close to 78,800.

Mr. Scholz put that down to the fact drilling activity for oil and and natural gas remained steady throughout the year, with high commodity prices and modest improvements in capital markets.

With the expected completion of the Trans Mountain pipeline expansion project likely to add another 590,000 barrels of oil equivalent per day to the market – and Coastal GasLink also anticipated to reach mechanical completion by the end of 2023 – he’s hopeful about next year.

Even though 2023 is expected to be “a very fragile time for the global economy,” Mr. Scholz said he doesn’t see activity in the services sector slowing down, partly because of the likely continued demand for Canadian energy.

“The biggest challenge ... for our sector is crewing our rigs and ensuring that we continue to offer safe operations,” he told media after the association’s state-of-the-industry address in Calgary Wednesday.

“But I think the good news is things are finally starting to turn the corner.”

The second challenge bearing down on the sector is the federal government’s 2030 target to reduce emissions in the oil and gas sector by 42 per cent. While the vast majority of oil sands producers are working on a plan together to hit net zero by 2050, it’s a different story in the conventional oil and gas sector in which many CAOEC members operate.

To accelerate decarbonization in the sector to meet 2030 goals, Mr. Scholz said it’s imperative for industry to collaborate with Ottawa and provincial jurisdictions – and that includes pushing for a tax credit to spur the rollout of emissions-reduction technology such as hydrogen-powered rigs and on-site carbon capture.

“The technology is there. The capital, not so much,” he said.

“If we’re going to accelerate that deployment, we need support today.”

A tax credit would also allow CAOEC members to continue their pivot into non-fossil fuels, such as drilling for lithium, geothermal energy and helium.

”You cannot have a successful transition or transformation of our energy system without our members,” he said.

Alberta Premier Danielle Smith, who was the keynote speaker at the event, told CAOEC members that all levels of government must do their part to keep the energy sector strong, adding that Alberta is “pursuing a clean technology revolution that will reduce emissions.”

“The biggest obstacle facing the growth of the sector is not the oil fields. It’s not the global markets. It is located in a building about 2,400 miles east of here on Parliament Hill,” she said.

“Make no mistake, we have never faced the triple threat of hostility, ideology and incompetence that we see from the current federal government.”

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