Varcoe: As oil prices climb higher — sparking talk of $100 a barrel — a new boss to take helm at PSAC
The announcement comes as the oilfield services industry — and the broader Canadian oil and gas sector — is experiencing a sharp change in fortunesPHOTO BY SUPPLIED
As oil markets shift into a higher gear — and there’s even talk crude prices could spike to US$100 a barrel next year — a new executive is set to take over the helm of the Petroleum Services Association of Canada.
The organization that represents more than 190 members in the service, supply and manufacturing sectors within Canada’s oil and gas industry, announced Monday that Calgary lawyer and executive Gurpreet Lail will become PSAC’s new boss next week. She will take over from interim CEO Elizabeth Aquin.
The announcement comes as the oilfield services industry — and the broader Canadian oil and gas sector — is experiencing a sharp change in fortunes. It endured a punishing period last year with oil prices tanking, along with the lowest levels of drilling activity recorded in the Canadian sector in decades.
However, oil markets have been on a tear this year as demand is recovering and COVID-19 vaccination levels climb higher. Benchmark West Texas Intermediate (WTI) crude for July delivery closed Monday at US$73.66 a barrel, up more than $2 on the day.
And while spending increases by petroleum producers — and more activity for oilfield services firms — remain relatively muted, there are growing expectations of better times ahead.
“The biggest issues that we’re having right now are that the energy sector went through a huge financial downturn and we now need to see how to help our sector actually come out of that downturn, which was compounded by the pandemic,” Lail said in an interview Monday.
“Where we are as an industry, and where our members are, is that there’s hope and optimism where there hasn‘t been any in quite a long time … Our members have been resilient.”
The oilfield services sector has been remarkably durable after a prolonged downturn that began with the collapse of oil prices from above $100 a barrel in mid-2014 to just $27 two years later — with a rebound in the following years derailed by the pandemic.
The COVID-19 crisis crushed global energy demand and sent WTI prices spiralling to new lows in the spring of 2020.
Only 3,300 oil and gas wells were completed in Western Canada last year — compared to more than 13,000 in 2014 — but that number should rise to about 4,800 this year and then climb to 5,700 next year, according to ATB Capital Markets.
“We are seeing a pretty good cyclical rebound out of the downturn, which should carry through into the second half of the year, and Canada seems to be rebounding a little bit faster than the U.S.,” said ATB analyst Tim Monachello.
“There’s a lot to be positive about right now.”
There is also growing confidence that stronger oil markets are likely here to stay as demand continues to rebound and some short-term market concerns have faded.
A report Monday by the Bank of America Corp. is projecting Brent oil prices will average $68 a barrel this year and warns “tighter supply and demand balances in 2022 could push oil briefly to $100 a barrel,” while averaging $75 next year.
Oil prices have risen by more than 50 per cent this year and as more economies open up around the world, consumption is rising.
Michael Tran, RBC’s managing director of global energy strategy, said total demand is just above 96 million barrels per day (bpd), about four million barrels below pre-pandemic levels. He expects it to return to around 100 million barrels per day in the fourth quarter.
In addition, OPEC and U.S. producers have shown discipline in not bringing a lot of additional supply on to the market that would push prices down.
“The market is coming to a realization the summer is going to be a barnburner of a summer, from an oil demand perspective, at least in the U.S,” Tran said.
He expects WTI crude to average $74 a barrel through the second half of this year, “with intermittent sprints to north of the $80 mark potentially part of the equation,” before averaging $73 a barrel in 2022.
“You are in a market where the momentum is feeling … the best it has felt in a decade,” Tran added. “I would argue the Canadian oilpatch is feeling the best right now it has in a number of years.”
January McKee, president of AMGAS Services, which provides hydrogen sulfide treatment and emissions control in the energy industry, said the company is seeing an increase in customer interest, as maintenance activity postponed during the pandemic is coming back.
“Everyone is cautiously optimistic about where things are going, but make no mistake, it’s been a challenging period for our sector,” said McKee, who is also PSAC’s board chair.
Yet, it’s clear the situation is slowly improving.
An upturn in commodity prices and increasing demand for oil and gas have sparked hopes in the sector that underlying conditions have finally changed.
Meanwhile, new leadership is arriving at PSAC. McKee sees the new CEO as the right fit for the times, coming in from outside the industry. Lail is currently the chief executive of Calgary’s Big Brothers Big Sisters and previously worked as executive director of the Shock Trauma Air Rescue Society, better known as STARS.
Lail said she hopes to see the conversation change around the role of oil and gas in Canada and how the industry can play a vital part in the country’s economic and environmental future.
“This is such an exciting time for Canadian energy as a whole and from a service side, it’s absolutely the most imperative time right now,” she added.
“People are doing so many new innovative things in the industry that it’s time to get that word out.”