By Nia Williams
CALGARY, Alberta, Nov 22 (Reuters) - Drilling in Canada's oil and gas fields will pick up in 2017 because of more favourable pricing after two years of record low activity, an industry group said on Tuesday in its annual forecast.
The Canadian Association of Oilwell Drilling Contractors said a more stable U.S. benchmark crude oil price would lead to a 31 percent increase in the number of wells drilled to 4,665 next year from an estimated 3,562 by the end of 2016.
The industry group forecast operating days would rise 21 percent to 48,980 in 2017 but expects the fleet to drop by 55 drilling rigs to 610.
"Activity is moving in the right direction, but we're still in a depressed and desperate economic environment," association President Mark Scholz said in a statement.
Canada, which has the world's third-largest crude reserves, has been hard hit by the more than two-year slump in global oil prices, with companies slashing billions in capital spending and laying off tens of thousands of workers.
Saskatchewan is expected to lead the way in the recovery, the association said. The prairie province is Canada's second-largest crude producer after neighbouring Alberta.
After record low rig utilization rates in 2016, the association said it would be hard for 2017 to be any worse but cautioned that uncertainty about new export pipelines for Canadian crude and looming carbon taxes from the provincial and federal governments could make it difficult for the nation to attract long-term investment.
"To achieve a healthy oil and gas industry, governments must ensure its fiscal policies are competitive, predictable, and consider the cumulative costs of doing business in Canada versus other global jurisdictions," Scholz said.
Prime Minister Justin Trudeau's government will decide whether to approve the expansion of Kinder Morgan (NYSE:KMI) Inc's KMI.N Trans Mountain pipeline to the British Columbia coast in coming weeks, a project that is facing fierce opposition from environmental campaigners.