Saskatchewan economic minister sees opportunities despite price environment

At an energy leaders breakfast during the Global Petroleum Show (GPS) in Calgary June 10, Bill Boyd, Minister of the Economy for Saskatchewan, Canada, spoke about the opportunities for the oil and gas industry in his province, even in the current price environment.

Canada’s second-largest producer of oil, Saskatchewan accounts for 15% of total crude oil production, and is often overshadowed by Alberta’s prolific production. At the end of 2014, however, the Saskatchewan Ministry of the Economy reports there were more than 30,000 wells producing an average of 525,000 b/d.

Despite a significant pull-back in drilling and production in 2015, Boyd said there have not been extensive layoffs, as companies seek to retain talent for when the market rebounds. There are still recoverable reserves in the province of 1.3 million bbl of oil and 1.8 tcf of gas, says the ministry.

Saskatchewan has several incentives for oil and gas investment in the province. Stability, said Boyd, is among the most attractive. “The economy is diversified. Oil is key, but there are significant mineral and mining operations in uranium, coal, and potash,” he said. “We’ve balanced the budget, lowered taxes, established a stable oil-royalty regime and a fair regulatory environment. Companies want to know the climate before making investments,” he added.

The fair climate, said Boyd, is due to collaboration with the oil and gas industry, which has produced royalty rates that are sensitive to price and production. Low royalties and freehold production taxes are applicable to all newly drilled conventional oil and gas wells, and there are drilling incentives for new horizontal, deep, and exploratory wells, according to the ministry’s petroleum and gas division.

The favorable royalty and tax rates extend to incremental production through enhanced oil recovery projects—an area in which Saskatchewan has taken a hands-on approach. According to Boyd, the province invested $1.4 billion (Can.) to capture 95% of the carbon dioxide emissions generated by coal-powered electricity power plants. The equivalent of taking 250,000 cars of the road, said Boyd.

In addition to “cleaning” coal, Saskatchewan is using the CO2 for EOR reinjection in the Bakken. Two major CO2 flood projects are active in the province; one in the Weyburn Unit by Cenovus Energy Inc. and one in the Midale Unit by Apache Canada. Together these projects are projected to recover 222 million bbl of incremental oil, lengthen each unit’s operating life by at least 25 years, and provide underground storage for about 35 million tonnes of CO2, according to a ministry report.

“EOR benefits alone will pay for the installation of Saskatchewan’s carbon-capture facilities,” said Boyd.

Once out of the ground, refining and transporting oil and gas is a priority for the province. “Pipeline development needs to be advance,” said the economic minister. “It’s very important to Saskatchewan and the oil and gas industry that we continue to promote initiatives that to move our product to our markets.”

The province already has an “extensive” network of pipelines and rail, according to the Ministry of Economics. Saskatchewan had a crude oil refining capacity of about 109,000 b/d and heavy crude oil upgrading capacity of about 137,000 b/d, at yearend 2014.

Contact Michael T. Slocum at michaels@ogjonline.com.

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