Postmedia Content Works
A Calgary-based energy company with a global presence has found a strong business climate in Saskatchewan.
“There are just so many things that are great about doing business in the province,” says Anthony Marino, president and chief executive officer of Vermilion Energy, which started operating in Saskatchewan five years ago.
Among the long list of positives that comes with working in the province is the new Waterflood Development Program, Marino adds.
Waterflooding involves the injection of non-potable recycled water into an aging well to boost the pressure in the reservoir and increase production. The initiative offers producers the ability to defer royalties paid to the provincial government.
“It’s a moderate fiscal incentive,” Marino says. But it’s an important one, allowing companies to invest more in the province to expand development.
“It’s a win-win for the province and producer,” Marino adds. “This deferral ultimately gets more royalties for the province while increasing jobs and investment.”
Waterflooding is one of a number of approaches used in the energy industry to access resources that were previously thought unreachable, effectively augmenting the life of aging assets, Marino says.
And it’s especially important for producers such as Vermilion, which has significant oil reserves in the province. It also requires capital, and the Waterflood Development Program is designed to offset some of those initial investment costs, providing a three-year royalty deferment on production.
Overall, the program offers up to $1 million in deferred royalties per well. And while the province doesn’t collect royalties in the near-term, the program is expected to boost revenues over the long-term.
Although an important factor for firms such as Vermilion when deciding to increase investment in the province, Marino notes Saskatchewan is “a great place to invest” for a number of reasons.
“It has a great local workforce that is very well-trained and has a good work ethic,” he says. “And industry has consistent encouragement from the provincial government.”
This makes the province one of the premier jurisdictions in the world for resource development, Marino adds. It’s also why Vermilion has been boosting its operations in Saskatchewan.
Launched 25 years ago in Alberta, Vermilion produces more than 100,000 barrels of oil equivalent per day with approximately 500 million barrels in reserves. A global company, with operations in Canada, Europe, the United States and Australia, Vermilion began investing in the province five years ago, steadily increasing its footprint. Employing 900 full-time and contract workers worldwide, almost 20 per cent of its workforce is working on the Saskatchewan assets.
“Saskatchewan is blessed with an abundance of oil resources,” says Marino, adding the western parts of the province are renowned for heavy oil production.
In the southeast, however, significant light oil deposits exist. “For our company, light oil has the right economic characteristics, and it is where our expertise lays.”
And that’s led Vermilion to assign more than a third of its capital budget to an area that accounts for about 25 per cent of its overall production.
Yet, despite the province’s many great qualities for energy development, the downturn in oil and gas prices has taken its toll. Marino says the provincial government understands the challenges faced by the industry and has worked closely with energy companies to develop a regulatory framework that strikes a balance between environmental stewardship and development. Addressing both issues is critical to forward-thinking producers like Vermilion, he adds.
“We’re one of the top-ranked oil and gas companies in the world regarding carbon reporting and carbon intensity reduction.”
Reflecting this focus, Vermilion’s current and future investments aim to minimize environmental impact while maximizing return on Vermilion’s dollars invested. The company’s investment in Saskatchewan is certainly significant. For 2019 alone, Vermilion plans to invest about $200 million, drilling 140 wells. About $30 million of that sum will go toward enhanced recovery projects.
As Marino says, the Waterflood Development Program “makes sure the best technology is applied to increase the recovery of existing pools (of oil).”
And that’s not just good for the company’s bottom line.
“It works to the benefit of the province,” Marino adds. “We certainly intend to be here for the long haul in Saskatchewan because we think it’s a great province in which to be an energy producer and investor, now and in the years to come.”
For more information on doing business in Saskatchewan, visit ThinkSask.ca.
This story was created by Content Works, Postmedia’s commercial content division, on behalf of the Government of Saskatchewan.