Canada: Natural gas drillers brace for sour year

Hopes that Canada’s natural gas industry might soon pull itself out of its severe slump were dashed Tuesday as the country’s largest natural gas producers said low commodity prices will force them to keep domestic spending on exploration in 2008 on a par with this year’s anemic levels.

At the Peters & Co. energy industry conference in Toronto, the country’s two largest producers, EnCana Corp. and Canadian Natural Resources Ltd., both said they didn’t expect their 2008 gas budgets to change significantly, while other major firms
That’s a worrying prospect for Canada’s beleaguered energy service firms, given that low demand for their drilling rigs has sent the share price of sector leaders such as Precision Drilling Trust falling by almost half since last October.

Rig utilization rates in Canada are at their lowest this year since at least 2002, as producers eschew gas exploration in favour of alternatives such as share buybacks, or pursue growth in regions such as the oil sands.