Mirroring the National Energy Program a bad idea, says Petroleum Services Association of Canada
The worst victims of the current economic slump stop short of trying to turn back the clock
It would be bad medicine to revive 1970s and ’80s attempts to cure hard times with federal or provincial government drilling grants, says Roger Soucy, president of the Petroleum Services Association of Canada.
“We didn’t accomplish a whole lot,” recalls Soucy, who has led the PSAC for its entire history since its birth as an industry response to Ottawa’s 1980 National Energy Program. The NEP, and provincial co-operation with it under reluctant agreements to make the best of a despised federal policy of central economic planning, included multibillion-dollar handout schemes called PIP and APIP, short for Petroleum Incentives Program and Alberta Petroleum Incentives Program.
The old approach made for big announcements and glowing images of political generosity – but not much for energy livelihoods and supplies, Soucy recalls. “We didn’t end up with any more wells.”
Drilling schedules, rather than total industry activity and employment, were all that changed as a result of grant eligibility and payment rules. “Work was transferred into the summers.
Operators [exploration and production firms] held off drilling and moved the timing of wells around.”
Sour memories of futile political schemes help the industry stand by its declared faith in a market-driven Canadian energy sector that has prevailed since the NEP was dismantled by the 1985 Western Accord between the federal, Alberta, British Columbia and Saskatchewan governments. No pleas to suspend the laissez-faire approach of energy free trade surfaced during the bleakest moment yet in the long slide down of fossil fuel prices, investment, projects and employment since mid-2008.
The industry touched bottom about the time of an annual spring PSAC review and forecast event in downtown Calgary. Andrew Bradford, Canadian energy research director for the North America-wide Raymond James chain of investment offices, voiced a consensus among financial analysts that no rapid recovery was in sight. A grim-faced Soucy, saying “Batten down the hatches, boys,” released bleak surveys of mid-2009 drilling intentions and employment.
PSAC’s forecasts are widely trusted because its members are in touch with every aspect of operations by an industry that relies on service and supply contractors to carry out virtually all of its plans. The association’s barometer is signaling that the number of wells drilled across Western Canada will plunge by about 40 per cent to a mid-1990s level of 10,000 this year from 16,940 in 2008. The drop is about the same as the severe erosion of prices for natural gas, which is the target for about three-quarters of drilling.
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