The morning of March 9, the world woke up to one of the biggest oil shocks in decades. The price of crude oil, both West Texas Intermediate (WTI) and Brent, had dropped as much as US$13 when trading opened overnight before climbing back $5 or so by mid-afternoon.
That left WTI floating around US$33 per barrel, and Western Canadian Select (WCS) around $22 at the time Saskatchewan Energy and Resources Minister Bronwyn Eyre happened to be hosting a press conference about well abandonments. (WCS closed at $15.73 that day)
鈥淲e all know the sector is facing a lot of challenges. We鈥檙e all hearing the news today,鈥� Eyre said in her initial remarks.
Facing reporters, Eyre said, 鈥淥bviously, it鈥檚 a concern. We鈥檝e all been monitoring and watching the news around that over the last 24 hours at any rate. It鈥檚 too early to tell, in terms of long-term impact.
鈥淲e hope that things correct. We鈥檙e seeing a bit of a multiplier effect in the markets and watching it with a bit of concern, but hope that it鈥檚 short term.鈥�
Asked what are the implications for the upcoming Saskatchewan budget, Eyre said, 鈥淢y understanding is the numbers were finalized Feb. 28. Obviously, the budget鈥檚 coming out next week.
鈥淭he minister of finance, I鈥檓 sure, will have something to say in the next day or so, and certainly on budget day, but we鈥檙e going to wait for budget day, at this point, and hope that, in the meantime, this is a short-term thing and won鈥檛 impact long-term forecasts for the price of oil.鈥�
In terms of the ministry planning for the potential of a longer-term downturn, she replied, 鈥淚t鈥檚 too early to tell, of course, in that we鈥檙e all monitoring this. And certainly the ministry of finance will be looking at this very carefully with our experts from the ministry of energy and resources. Right now, the way the budget is set up, it鈥檚 based on forecasts fore the coming year, which is a relatively involved, not simple process.
鈥淎gain, numbers were finalized Feb. 28. We鈥檒l see what comes out in the budget, in terms of estimates, going forward, but we do remain hopeful this is a short-termed phenomena.鈥�
On Feb. 28, WTI was trading for US$44.72, and on Feb. 20, it was US$53.78 per barrel.
鈥淭he budget will go forward, as planned,鈥� Eyre said.
The Saskatchewan government has moved away from its reliance on resource revenue in recent years, she noted. 鈥淭he oil and gas sector still plays an important role in our GDP and is a very crucial sector for us, so, of course, it鈥檚 of significance when we see this happening today, but again, it鈥檚 too soon to tell. We鈥檒l continue to monitor it.鈥�
Alberta Premier Jason Kenney gave a press conference a few hours later, addressing similar concerns, as well as the impact of the COVID-19 coronavirus. His government had just presented its own budget on Feb. 27. He said the budget would be passed as presented, but expected an update in the second quarter of 2020 reflecting the new reality of much lower oil prices.
That province will be organizing an urgent economic panel, with Jack Mintz, University of Calgary economics professor, as its head.
Alberta鈥檚 budget forecasted oil at US$58 per barrel for 2020.
Asked about the impact on oilfield services, including the apparent lack of significant uptake in the waterflood incentive announced a little over a year ago, Eyre said, 鈥淭hese are challenging times in the sector.
鈥淚 think one of the important things to focus on, about the announcement we made today, is that despite the economic downturn that we鈥檝e seen in the oil and gas sector, there have been a number of cleanups, of wells, that we鈥檝e seen. Which is all about the long-term sustainability of the sector.
鈥淚t鈥檚 about securing future investment in the sector. The fact that we鈥檝e seen 2,000 cleanups of wells over the last year, and into this year, is very significant.鈥�
