Saskatchewan will see 2,580 wells drilled in 2010, a 47-per-cent increase over the 1,750 wells drilled in 2009, according to the latest Petroleum Services Association of Canada (PSAC) drilling forecast released Thursday.

The revised PSAC forecast is for 11,250 wells to be drilled across Western Canada, representing a 35-per-cent increase in total wells drilled compared to the final tally of 8,350 wells for 2009.

The revised forecast is up from PSAC's initial drilling forecast in November of 8,000 wells, and from PSAC's first-quarter update in January, when 9,000 wells were forecast.

"It's the best (drilling outlook) in two years," said Roger Soucy, PSAC president, in an interview Thursday.

The forecasted increase in drilling activity can be attributed to three main factors: the increase in the price of oil, the anticipated royalty changes in Alberta, and the general boost in economic activity following the global recession.

PSAC is basing its updated 2010 forecast on an average natural gas price of $4.25 per thousand cubic feet (mcf) and an average crude oil price of $82 US per barrel (WTI) in 2010.

"The oil price is (high) enough to drive virtually anything you want to chase in Western Canada,'' Soucy said. "The gas price isn't enough to chase anything in conventional gas, particularly shallow gas which is where (most of the activity) is at. Conventional gas is just a non-starter under $6 or $7 (per mcf) for sure and probably higher.''

On a provincial basis, PSAC is forecasting 7,590 wells to be drilled in Alberta, a 31-per-cent increase over final 2009 drilling levels. PSAC expects B.C. will see 560 wells drilled this year, a two-per-cent decrease in drilling from 2009, while Manitoba is expected to more than double its drilling activity, with 475 wells forecast over the 230 wells drilled in 2009.

Of the 11,250 wells forecast in Western Canada this year, 4,778 are natural gas wells, 5,632 are oil wells and 840 are dry holes or service wells. In Saskatchewan, the breakdown is expected to be 2,275 oil wells, 177 gas wells and 128 "other.'

Soucy said the technological breakthroughs that helped fuel the Bakken play — the combination of horizontal drilling and hydraulic fracturing — seem to be spreading to other oil-prone parts of the province, like the southwest and west-central areas.

"The technology that was originally used in the shales (like the Bakken) is now being looked at in conventional areas that have already seen a lot of vertical drilling. There's still 60 to 70 per cent of the oil in place, so they're testing the horizontal drilling and multi-stage fracturing.''

Soucy said the worst appears to be over for companies that service the upstream oil and gas industry in Western Canada.

"At worst, downsizing has flattened out for petroleum service and supply companies," Soucy said. "And in pockets, companies are hiring people — pockets like pumping services and services related to shale development."

PSAC is the national trade association representing over 250 companies, employing more than 52,000 people and contracting to oil and gas exploration and production companies. PSAC members represent over 80 per cent of the business volume generated in the petroleum services industry.

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