With more oil and gas wells abandoned than drilled in Alberta this year, decommissioning dead rigs is the only business showing any kind of growth in Western Canada’s struggling oilpatch.
Citing the Alberta Energy Regulator, CBC reports that as of early October, 3,666 wells had been abandoned in Alberta so far this year. According to the Petroleum Services Association of Canada (PSAC), only 2,425 wells were on track to be drilled in the province by the end of 2019—3,352 fewer than during the oil boom 10 years ago.
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With the boom turned to bust, oilfield service companies which had depended heavily on drilling wells are turning increasingly to decommissioning them, especially the smaller companies that “would go belly up” without the work.
And “the growth potential for decommissioning wells is substantial considering there are about 93,000 inactive wells in Alberta and 139,000 across Western Canada,” CBC writes. Further improving the outlook for those companies seeking to keep afloat by taking old wells out of commission was the 2018 decision by the previous Alberta government to loan the industry-funded Orphan Well Association C$235 million over two years, to assist in its mission to clean up the wells that are all too often abandoned when fossils declare bankruptcy.
“The financial boost from the government loan has made a ‘substantial’ difference as nearly 800 wells were cleaned up this past year, a figure which has increased steadily from 50 wells in 2014,” the national broadcaster reports, citing the OWA.
A complex process with an uncertain and often expensive trajectory, the decommissioning business itself is not exactly booming, however. CBC says actual results depend in part on the geological location of the well, as well as its age, and can cost a fossil company anywhere from $100,000 to $500,000.
Such uncertainty often led to industry skipping the clean-up bit entirely—that is, until the Supreme Court ruled in January that bankruptcy could no longer be used as a shield to leave oil and gas infrastructure rusting away in a field.
Thus pressed, the industry is seeking further support from both provincial and federal levels of government. Oilpatch consultant and policy analyst David Yager told CBC he hopes the Kenney government will “relax some of the regulations about abandonment work,” suggesting that such regulations “might be an obstacle to getting the work done”.
The oilfield service industry has also been lobbying Ottawa, unsuccessfully so far, “for a type of investor tax credit or resource credit to spur decommissioning work.”
