A few weeks after I joined Oilweek, the Petroleum Services Association of Canada came into being as the service and supply members of the Canadian Association of Oilwell Drilling Contractors decided they would be better served with their own organization. The CAODC let them go with its blessing.

A few weeks later, Roger Soucy – who had been the CAODC’s service & supply sector manager – was named president of the fledgling organization, and he’s directed PSAC ever since. Over the years, he’s been through more booms and busts than many of us can remember, and has overseen the growth of the organization from an idea in the heads of a few executives to the focused, credible and respected national voice of the service and supply sector that it is today.

Over the years, I’ve relied on Roger extensively for comments on industry conditions and affairs, and have found him to be a forthright and honest source, always willing to offer an opinion and never shying away from the tough questions.
David Yager – who I’ve known since his days as a competing journalist with The Roughneck – has grown with the industry and with PSAC, and now serves as the organization’s chairman. Over the next several weeks, he’ll be directing the search for Roger’s replacement, and the task will not be easy.

“In his 29 years of dedicated service, Roger has done an outstanding job of being the main spokesman for our large and diverse oilfield service sector,” Yager says. “During that time he has helped keep PSAC membership strong and united and has presented a consistent, positive message about the importance of the oilfield service industry to Albertans, Canadians, investors, other industry associations and all levels of government across the country.”

Roger has been the face of the service and supply industry in Canada for three decades. It will be tough to see him go.

A few years ago, when gas was robustly into the double digits, it was easy to join the dots and derive a clear shale gas picture: slumping conventional supply plus strong demand equals high prices and clear incentive to drill and produce more supply, especially in a robust economy with strong future demand projections.

Then reality hit, the economy tanked and demand – especially from the key industry sectors – evaporated almost overnight. In keeping with traditional economic theory, prices started sliding, from the mid-teens in the summer of 2007 to only US$4 an mmbtu last week.

But still the shale boom continues. Part of the strength can be attributed to lease requirements in the States: if wells aren’t drilled, rights to the land will be lost and someone else will get a kick at the can. That drill it or lose it mentality has driven much of the recent drilling activity, aided by a contango strip of natural gas futures that offered producers the opportunity to hedge undeveloped reserves at fairly attractive prices, in the $6 to $8 per mmbtu range.

That luxury, however, is about to end: current trading on the New York Mercantile Exchange has next winter’s gas prices barely over the $5 a mark, and I fear it won’t be long before producers realize that gas today won’t fetch enough tomorrow to pay yesterday’s drilling bills. That’s when the bottom will fall out.

Devon was recognized for its application of minimal disturbance techniques on roads it builds to wellsites, cutting right-of-ways from 20 metres to as little as eight metres. Wood removed during the clearing process is then used to create a mulch that is used in road and lease construction, instead of being burned.

While the technique is environmentally beneficial, there is an economic benefit as well – with a mulched road in muskeg regions, the work season can be extended, and in most parts of the basin where the technique is used, Devon can now attach new reserves in the year they are drilled, rather than waiting until the next winter drilling and construction season.

Other CAPP Stewardship Awards went to BP Canada, which took down the President’s Award for setting a new benchmark for responsible development with its work at the Noel project in British Columbia; ConocoPhillips Canada, which earned the Health & Safety Award for a program of advanced safety auditing; and the 11-company Horn River Basin Producers Group (Apache Canada, Encana, ConocoPhillips, Devon Canada, EOG Resources, Imperial Oil, Nexen, Pengrowth Energy, Suncor, Quicksilver and Stone Mountain) earned the Social Performance award for their efforts to facilitate open communication, understand stakeholder and First Nations concerns, minimize environmental impacts and maximize benefits to the area.

In our Green Leaders issue, I editorialized about the upstream oil and gas industry’s need to beat its drum a little louder when it comes to its own environmental performance. Too often, the negative vibes emanating from the patch – dead ducks, toxic tailings, sour gas blowouts – capture the biggest headlines, while the numerous acts of responsible stewardship like those highlighted by the CAPP program go unheralded in the mainstream media.

Royalty revenues will be reduced by $27 million in the current fiscal year, Ron Liepert said, but will be offset by a $55 million increase in land sale revenue. In 2011-12, royalty revenue will fall by $16 million due to the changes but will increase by $49 million because of projected increases in activity. Land sale revenue will increase by $76 million, tax revenue will increase by $31 million.

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I don’t recall this much buzz and anticipation for a missive from the provincial government since…well, since the New Royalty Framework (NRF) was announced, and we all know how well THAT turned out.

When I interviewed Liepert a month or so ago (you can read it all in the April edition of Oilweek, due on the streets tomorrow), he told me that the Competitiveness Review vis-a-vis the royalty structure in Alberta would not include a New New Royalty Framework (NNRF) or Son of NRF, if you will, but rather various appendages and modules hung on the NRF and designed to address the short-comings of the NRF. The intent, he said, would be to correct the errors of the NRF and make permanent the tweaks that were implemented post-NRF to address the so-called “unintended consequences” of the original review.

I guess we’ll see….

With the 12 per cent boost, the association now is forecasting 9,000 wells will be drilled, on a rig release basis, in western Canada this year – a far cry from the 20,000 plus that were being punched down just a couple of years ago, but an improvement none the less. Last year, a mere 8,450 wells were drilled in western Canada, the lowest total since 1992, when the patch saw less than 4,500 wells drilled.

What drove the forecast higher, says PSAC boss Roger Soucy, are stronger commodity prices, particularly for natural gas – which is the backbone of the conventional energy business in western Canada generally and Alberta in particular. For 2010, PSAC is projecting gas at AECO will average C$5.50 per mcf, while WTI oil will average US$74 per barrel.

“Industry is expecting commodity prices to strengthen further this year,” he says. “Improved prices led to a spurt in drilling activity in December 2009, and we expect stronger pricing to continue to impact drilling levels as we move through 2010.”

Soucy remains cautiously optimistic. Surging field activity has a few more executives smiling in downtown Calgary – 556 rigs are making hole in western Canada this week, compared to 329 as 2009 came to a close – but any lasting signs of recovery won’t come for a few weeks yet.

“The commodity pricing signals have been positive so far but this may not be the quick and complete turnaround everyone is hoping for. The real test will come after spring break-up.”

Still, I never thought the authorities had to look much further than Ludwig’s Trickle Creek commune for evidence, and it appears Ludwig’s detention was carried out to aid that search – RCMP thought it might be easier for them to conduct an extensive search of the commune for DNA evidence linking Ludwig or his followers to DNA evidence collected from notes sent by the bomber.

In the end, Ludwig was released after 10 hours – and amidst rumours he might be charged with extortion – while the RCMP said their search of Trickle Creek did turn up additional evidence, although they did not elaborate on what that evidence might be.

Where the investigation goes from here remains unclear, but one thing is almost certain: Ludwig’s stature as a folk legend – no matter how misguided or contemptible that might sound, and it truly sticks in my craw – has been ratcheted up a notch or two, and I’m not sure the authorities had that in mind.

Although the WAP is still in the midst of developing its energy policy – aided by long-time Oilweek columnist David Yager – big C conservatives discovered during the last election campaign just how disaffected the province’s energy industry is with the Progressive Conservatives. Fundraising efforts were virtually cut off at the pass as oil industry execs spoke out with their wallets over Stelmach’s new royalty regime.

The WAP has grown quickly since the last election, and now counts more than 13,000 Albertans on its membership rolls, and the additions of Anderson and Forsyth will undoubtedly give the party a larger voice in the legislature, which has, until now, been manned for the party by Paul Hinman.

The Anderson/Forsyth defections are another nail in Stelmach’s coffin, which could be permanently sealed shut unless the province’s competitiveness review – due out sometime in the next several weeks – offers dramatic steps to improve the lot of the conventional oil and gas industry in Alberta.

Stay tuned…