Canada’s oilfield drilling and services sector is facing renewed uncertainty as U.S. President Donald Trump’s threat of tariffs on Canadian crude imports threatens to derail a fragile recovery. The industry, which has been rebounding from a decade-long slump, is already showing signs of slowing, with companies delaying investments and reducing activity due to the potential impact of a 10% tariff on the 4 million barrels per day (bpd) of Canadian oil exported to the U.S.
The Canadian drilling sector, which saw employment levels collapse between 2014 and 2020 due to low oil prices and the COVID-19 pandemic, had been gradually recovering. However, Trump’s tariff threat has introduced new volatility, causing oil producers to adopt a cautious approach. Precision Drilling, Canada’s largest drilling rig operator, reported a steeper-than-expected slowdown in its Canadian well servicing segment in late 2024, attributing it to customer hesitation amid tariff uncertainty.
A TD Cowen report from February downgraded its 2025 Canadian rig count forecast by 5%, predicting an average of 175 active rigs compared to an earlier projection of 185. The bank also downgraded its recommendations for Precision Drilling and Ensign Energy Services from “buy” to “hold,” reflecting growing concerns about the sector’s outlook.
Mark Scholz, president of the Canadian Association of Energy Contractors (CAOEC), noted that while the slowdown has been modest so far, involving only a few rigs, the anxiety within the industry is rising. “Any sort of investment reduction will have an immediate and very, very quick effect on our industry,” he said.
Smaller oil producers are particularly vulnerable to the potential tariffs, as they have less flexibility to absorb additional costs. Larger companies, with budgets already set for 2025, may stick to their plans in the near term but could scale back if tariffs are implemented.
Retaliatory tariffs by Canada on U.S. imports, such as sand used in hydraulic fracturing, could further exacerbate the situation, increasing costs for Canadian drillers. Gurpreet Lail, president of industry group Enserva, warned that tariffs could lead to job losses in a sector that has yet to fully recover from its 2014 peak. Employment in Canada’s drilling sector was only half of 2014 levels in 2024, and a projected rebound in 2025 is now in doubt.
“We thought we had finally seen a light coming at the end of the tunnel here, and people were getting back to work,” Lail said. “But this is not good news.”