Manitoba oil producers feel the pinch of slumping oil prices

A good amount of Manitoba's oil will be staying in the ground this year if the latest projections from the Manitoba Petroleum Branch prove true.

Manitoba Petroleum Branch expects to issue about 100 licenses for well drilling this year

Manitoba's oil and gas sector is feeling the pinch from slumping prices. (Riley Laychuk/CBC)

A good amount of Manitoba's oil will be staying in the ground this year if the latest projections from the Manitoba Petroleum Branch prove true.

The province is expecting to issue about 100 licenses for oil well drilling this year, less than half of the number of licenses issued to companies in 2015 and far behind 2011, a banner year for production in the province when more than 570 licenses were issued for drilling. 

The statistics come as companies large and small try to weather the slump in global oil prices and have officials at one of Manitoba's largest oil and gas producers trying to come up with a plan.

"Well, I try not to get too focused on day to day changes," said Ken Neufeld, the CEO of Tundra Oil and Gas. "You can't manage a business like this on a daily response."

I try not to get too focused on day to day changes- Ken Neufeld, CEO of Tundra Oil and Gas 

"I think in the long term they [oil prices] have to [rebound]," he added. 

He said the downturn is affecting the company's operations in Manitoba the same way others have been affected across North America. Tundra is predicting what Neufeld called a 'very substantial' reduction in capital investments this year.

"We can see from what's happened so far, we're about half of what we are in the previous year as far as drilling of wells goes," said Keith Lowden, the director of the Manitoba Petroleum Branch. 

He said it's too early to tell what the year as a whole will bring, but believes activity in the oil patch will be much lower than previous years. 

Lowden said that translates into fewer jobs in the oil and gas sector. Neither he nor Neufeld would get into specific numbers in terms of jobs.

Increase in cleanup activity 

However Lowden did say that there has been an increase in activity in companies wanting to clean up old, abandoned wells that are no longer being used, creating a few jobs for workers who would normally be working on drilling rigs and other equipment. 

"There has been a movement for companies to clean up their older wells," Lowden said. "There has been a fair amount of activity on that front."

There has been a movement for companies to clean up their older wells- Keith Lowden, Manitoba Petroleum Branch 

Statistics from 2015 on the number of inactive wells haven't yet been compiled, but at the end of 2014 the number was 735, according to the province. 

"We've gone from running seven drilling rigs under contract to almost one now as we're going into breakup," Neufeld said. "That's a quantum change that you're dropping six or seven rigs."

He said the effects on service companies will be great. 

"People in the industry are cautious and you can tell by the number of wells that are drilled that they are pulling back. They have pulled back," Lowden said. "There is less advancement going on at this time." 

Meantime, Neufeld said he's confident the industry will still be a viable one and oil prices will eventually rebound to a more favourable level. 


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