Saskatchewan is estimated to have 45.6 billion bbl of conventional oil in place, and the Canadian province is benefiting from renewed plays in the Bakken and other tight oil and gas formations.
Production from Saskatchewan’s portion of the Bakken has gone from a modest 945 b/d in October 2004 to nearly 67,000 b/d in December 2010. As of April 2011 the province had more than 2,700 wells producing oil from the Bakken, 95% of which were drilled since October 2004.
Saskatchewan land sale revenue from Bakken oil-prone lands is estimated at $1.4 billion since October 2004.
Success in the Bakken is leading industry to explore other promising tight oil formations in the province, said Rick Musleh, energy sector manager with Enterprise Saskatchewan in Regina.
Other plays include the Viking formation and the Lower Shaunavon formation. The Torquay formation could conceivably be included, although preliminary production is low and the potential is still being explored.
Saskatchewan in 2011
A wet spring in 2011 meant that the industry got off to a slow start, but it later roared back.
Industry drilled 3,578 oil and gas wells in the province in 2011, a 26.5% increase on the year.
The number of oil wells drilled, 3,528, was just shy of the 1997 record, and the number of horizontal oil wells was 1,992, which broke a record set in 2010.
Beyond the burgeoning Bakken play, multistage fracturing technology is being applied with success in the Kindersley-Kerrobert area, and horizontal drilling has increased production tenfold since 2007 in the Devonian Birdbear play in west-central Saskatchewan to roughly 5,000 b/d of oil and small volumes of gas.
Overall, Saskatchewan is the second largest oil producer in Canada and the third largest producer of natural gas, ranking behind only Alberta, Texas, Alaska, California, and North Dakota.
Saskatchewan accounts for 28% of Canada’s primary energy production and is one of the only places in the world that produces crude oil, natural gas, coal, uranium, biofuels, geothermal, wind, and hydro power in a single jurisdiction.
Flexible, stable fiscal terms
In a 2011 Fraser Institute study of the investment climate, as seen by oil and gas companies, in 136 provinces, states, and countries, Saskatchewan ranked first among 10 Canadian provinces and 11th best in the world.
The province’s royalty regime for conventional oil is sensitive to prices, production rates, and the quality of oil. The lower the market price of oil, the lower the royalty, and the lower the production rate of a well, the lower the royalty. The regime for natural gas is sensitive to the same variables.
As a general rule, the royalty for heavy oil will be less than for lighter oil, reflecting the lower prices and higher operating costs associated with heavy oil.
The province’s royalty regime also incorporates different categories that distinguish between older wells and newer wells based on the finished-drilling date of each well. To encourage exploration and development, production from newly drilled wells is subject to the lowest royalty rate categories.
The royalty regime for enhanced oil recovery projects is similar in structure to Alberta’s oil sands royalty regime, but Saskatchewan’s royalty rates are lower and are not price-sensitive as is the case in Alberta.
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