Although Saskatchewan has been affected by low oil prices, its diverse economy, abundant resources and progressive industry practices are positioning it to take advantage of the inevitable rebound.
While slumping oil prices have hurt oil producers and oil-producing provinces alike, the belt tightening also allows them to find new efficiencies and innovative ways to drill.
According to Scott Saxberg, president and CEO of Crescent Point Energy, this is especially true in Saskatchewan, where favourable economic and regulatory conditions allow companies like his to experiment and innovate.
“Because of the shallow nature of the oil fields in Saskatchewan and lower cost to drill wells, we’ve been able to test several types of technology,” says Mr. Saxberg. “This is a bit of silver lining in this downturn. And it will give us an advantage later, when prices improve.”
As Canada’s fourth largest independently owned oil and gas company, Crescent Point does the bulk of its drilling in the province and has been experimenting with technologies such as “tight rock waterflooding” – injecting produced water into unconventional, tight rock reservoirs to increase the percentage of oil recovered – making each play more productive. Crescent Point has also experimented with different completions techniques and fluids, and last year made the commitment to replace fresh water used in the completions process in its largest Saskatchewan oil plays with salt water that is naturally produced in the oil production process.
While Crescent Point came to Saskatchewan for its massive oil formations – including the Bakken in the province’s southeast and Lower Shaunavon in the southwest – and lower costs to conduct business, the company has also been won over by the proactive way the government works with industry to work out problems and ensure that business goes smoothly.
“One of the things that really distinguishes Saskatchewan from the other [oil] provinces is just the hands-on nature of the government’s energy group,” explains Mr. Saxberg. “You get person-to-person contact. You’re not just shuffled around from one department to another. You can pick up the phone, talk to them, work out issues and figure out ways to do things better.”
As a result, Crescent Point plans to spend up to 85 per cent of its $950-million in capital expenditures in the province, in 2016, including exploring the potential of a new play called Flat Lake, hundreds of kilometres in size, on the border with North Dakota.
Ed Dancsok, assistant deputy minister, senior strategic lead for oil and gas development in Saskatchewan, points out that the province has worked hard to create a “welcoming business environment with a strong and transparent regulatory regime that keeps industry on task and working towards specific goals. The framework also provides a level playing field for all industry to do their work in the province.”
The province also provides royalty incentives for drilling certain types of wells with innovative technologies, including hydraulic fracturing and horizontal drilling – a lateral approach to drilling oil reservoirs that allows an oil company to reach more resources with fewer wells.
The more efficient drilling processes have also helped oil companies to revive oil fields that seemed to be tapped out.
The Viking play, for example, is an extensive pool that runs into Alberta and has been producing for 50 years.
“By 2010 we thought it was pretty well depleted,” says Mr. Dancsok. “But oil companies brought in horizontal wells and found fresh oil, reviving that pool very nicely.”
Indeed, Mr. Dancsok points out the key to getting the most of an oil field is “not always about finding new oil with old ideas; it’s about accessing old oil using new ideas.”
Among the new ideas that Saskatchewan is promoting is to use steam-assisted gravity technology (SAGD) to recover greater quantities of heavy oil. Where once, with old practices, heavy oil recovery rates were five per cent, now companies such as Husky Energy, Northern Blizzard and Serafina Energy are employing SAGD to realize recovery rates as high as 60 to 65 per cent.
Saskatchewan is Canada’s second largest oil producer and third largest natural gas producer. While drilling activity declined by 50 per cent in 2015, and there has been an impact on employment, the province has been able to weather the storm thanks to its diversified economy.
“We are the leading agricultural exporter in Canada,” says Saskatchewan’s Minister of the Economy Bill Boyd. “We have the second lowest unemployment rate among the provinces. And some of the skills that would have been used in the oil field have been transferred to manufacturing, mining and industries.”
With the province holding the course economically and the oil industry tightening its belt and finding new ways to operate, both are better prepared to take advantage of the day when oil prices inevitably rebound from the current trough.
“We’re very focused on innovation and growing in Saskatchewan, taking advantage of the favourable conditions here,” says Saxberg. “When prices turn around, we’ll see an increase in capital expenditures and growth in production – there’s many years of drilling inventory that needs to be done. We’re very excited about the future here.”