Greener grass in Sask.

By Geoff Lee

January 27, 2016 2:06 PM

Oil industry stronger in Land of Living Skies

Out of work Albertans long gone to Saskatchewan for greener pastures are not likely to hop back over the border any time soon.
Both provinces however are expected to receive $1 billion over two years in federal infrastructure funds because the impact of the oil-price shock is felt strongest in Alberta and Saskatchewan.
Infrastructure Minister Brian Mason said last Thursday details of what the funds can be used for are being worked out.
The crash in oil prices has claimed about 35,000 jobs in the energy sector during the past year with Alberta taking the biggest hit over its more diversified Saskatchewan cousin.
Saskatchewan still has the lowest jobless rate in Canada at 5.5 per cent compared to 7.0 for Alberta just below the national average of 7.1 per cent.
“Overall for Saskatchewan the diversity in the economy serves us well,” Laurie Pushor, deputy minister of the Saskatchewan Ministry of the Economy, told the Source during a phone interview from Regina.
“We have a very good recovery in the forest space,” he said.
“We harvested 25 million acres last year and our potash and uranium industries continue to produce to very strong volumes as well.”
The province is on track for another year of record high employment averaging 573,900 workers for the first 11 months in 2015.
“We’ve had very strong continued in-migration for our workforce continues to grow,” said Pushor.
From October 14 to October 2105, the province gained 12,312 more people.
He said the majority of the influx is international, but there’s a lot of back and forth between Alberta and Saskatchewan.
“Depending on the day you look, it will favour one or the other.”
Despite adding 7,200 jobs from November 2014 to November 2015 the province is keeping a close eye on the price of oil.
“Given everything that’s happening globally it’s obviously something we are paying close attention to,” said Pushor.
He said activity in oilfield activity slumped by about 35 per cent in 2015 compared to 65 to 70 per cent in the conventional oil and gas base in Alberta.
“We know that there are some very attractive properties in Saskatchewan and we know that the companies that are active here are committed to the province long term,” said Pushor.
“We remain positive about our relative position.”
Alberta’s economy is expected to contract by more than 1 per cent in 2016 according to an industry forecast by the Conference Board of Canada.
Their report projects the Alberta and Saskatchewan economies will bottom out soon and begin to grow in the first part of 2016 provided oil markets stabilize.
The Canadian Association of Oil Drilling Contractors however, anticipates a rig utilization rate of just 22 per cent for the year.
Despite drilling activity dropping nearly 70 per cent in 2015 year over over production is just starting to drop off. 
A continuing oil supply glut and new production from Iran now that economic sanctions have been lifted on that country are keeping downward pressure on oil prices right now.
Demand for oil has increased by less than 2 per cent in 2015 according to a recent report by Deloitte.
Adding to the pressures of oversupply and low prices particularly in Alberta is the ongoing royalty review, climate change policies and carbon taxes.
In its energy forecast, Deloitte expects WTI in 2016 and 2017 to average below $50 per barrel US then gradually rise to $80 a barrel by 2022.
The Western Canadian Select heavy oil price is forecast at $35 a barrel for 2016.
While Pushor said it’s not his role to speculate when oil prices will recover he said, “What we do know is we have very good resources.
“We are very competitive in terms of the cost to produce some of our reservoirs, so we think we are weathering the storm a bit better than some other oil plays in North America.
“We feel like we’re well positioned.”
Low prices have led to news of reduced or delayed capital spending, asset sales, mergers and acquisitions and layoffs in Alberta, the impacts are not as bad in Saskatchewan.
“We hear about the potential for some rationalization and some mergers and those kinds of activities going on,” said Pushor.
“Our industry generally speaking seems to be weathering the storm to the best of their ability.”
The Conference Board of Canada expects employment, incomes, consumption and the housing sector to improve modestly in both province s in 2016.
They also expect some fiscal stimulus measures in Alberta’s budget will assist with growth in that province.
Pushor said his government can attend to the overall competitiveness in Saskatchewan to lessen the impact of the downturn on families and oil companies.
“We are actively supporting all sectors of the economy to the best of our ability working to attract investment in processing and manufacturing and obviously there are still investments in our mining expansion,” he said.
Diversity he said is the key to a healthy economy.
“If you do an analysis on the economy of Saskatchewan, you’d find it’s one of the most diversified economies in North America,” said Pushor.
“We think that’s going to serve us well for next while.”

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