The Torquay field in mid-September. A few years ago there were eight rigs working in one township. Now there are none in that same township. Photo by Brian Zinchuk

Straighten out RM headaches, cut red tape and build out a CO2-EOR strategy

 

As I noted on Sept. 28, there’s a substantial amount of concern in the oilpatch about the lack of activity despite high oil prices. As one person told me, “When oil was $40 a couple years ago I was optimistic that a price recovery would lead to increased activity in our region. Now that we’re struggling to keep a double digit rig count in SE Sask with $94 oil ($127 CAD) it’s tough to stay optimistic.”

As many of the commentators on social media noted in response to the previous column, a lot of the issues facing the oil industry are a result of the federal government’s quest to make us go away. But there are also many things the provincial government can do, especially since its stated goal is to increasing oil production by a third to 600,000 barrels per day in just six years, three months and one day. Tic toc, tic toc.

One area that is definitely within its purview is finally dealing with the hassles dealt to the industry by the rural municipalities. RMs exist at the leisure of the provincial government, after all.

A few years ago, just prior to losing my job with Pipeline News due to the COVID pandemic, I was gearing up to do a series of stories on how RMs make it hard for the oil industry. It’s an open secret that many RMs essentially extort as much money as they can when it comes to road permitting, especially in the springtime. Doing a move across several RMs can result in multiple, expensive permits for the same load, and all the hassle that comes with it.

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No one wants to say anything about it, because they fear that when the media exposure goes away, they’ll just get pummelled even harder by the now more-resentful RMs. But if the mafia in New York wants a cut to have your garbage picked up, the RMs road permitting sometimes walks and quacks like a similar duck.

There are situations where the oil industry pays the bulk of the taxes in some RMs, but has very little by way of a vote or say in said RMs operation or taxation. The oil industry is a well-abused cash cow in many cases.

And the Ministry of Energy and Resources is well aware of all of this. They’ve been told about it for years. So maybe its time to finally do something about it. And maybe they should have done more about it when the industry was really hurting, during the seven year downturn.

That’s a start.

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One thing I’ve heard from numerous oil companies working in Saskatchewan is the never-ending, always-increasing regulatory burden. Maybe it’s time to take a good look at the entire regulatory system, from permitting to environmental reviews to venting and flaring, with an eye to streamlining the whole process, and making it easier to do business here. And cut it out with the goofy things like anti-bullying requirements. Really? That’s what our provincial government has come to?

The oil industry pays the bill for the ministry to regulate itself. But there’s a perception that the ministry is not really seeking to help the industry. I’ve heard that many times.

I’ve also been asked what the province has concretely done to advance that goal of a one-third expansion of production. Here’s where the big money comes in.

SaskPower is trying to figure out how its going to keep the lights on with the recently announced federal Clean Electricity Regulations. While nuclear power is coming in the future, coal and natural gas are what we have now.

And in interviewing the CEO of SaskPower last Monday, it is becoming increasingly clear that the two coal plants near Estevan – Boundary Dam and Shand, will be converted to natural gas. And eventually carbon capture will be required on them, and the large natural gas power stations around the province, including Saskatoon, Swift Current, Moose Jaw and eventually Lanigan. I’m not sure about North Battleford, as that’s an independent power producer with a long-term power purchase agreement. But the time all this comes to pass, they might just retire that plant before rebuilding it with carbon capture. And that’s because we’re looking at about a billion dollars per carbon capture plant per site.

The problem facing SaskPower is that no one in Canada has done a commercial-scale carbon capture scheme on natural gas power generation, yet. But SaskPower already has an existing one sitting at Boundary Dam. If they converted the Boundary Dam Power Station Unit 3 to natural gas, they could easily use the existing, paid-for carbon capture unit to test out the process for natural gas. And since fly ash has been the major issue with the operation of that plant, switching to natural gas might actually make it work much better.

This leads me to believe we could see Unit 3 converted to natural gas in the near future – perhaps as little as a year or two from now.

But then SaskPower would need to install carbon capture on Unit 6 (and perhaps rebuild that unit, too) and Shand. But they would need a market for that natural gas. And this is how it can assist the oilpatch.

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Right now, BD3’s captured carbon dioxide is pipelined to the Weyburn Unit, where, combined with CO2 from the Great Plains Synfuels Plant at Beulah, North Dakota, it’s used in enhanced oil recovery. While I always new it was significant, I didn’t realize the depth of that significance until a few weeks ago.

Courtesy BlincSoftware.

BlincSoftware has been providing me with Top 10 well lists for a few months now. And for July, they included a list of the top 100 conventional wells in Saskatchewan. Of the tens of thousands of wells in Saskatchewan, 31 of the top 100 were in the Weyburn Unit, benefitting from the CO2-enhanced oil recovery scheme. Not only that, but it’s extended the life of the field for decades, with decades more to come, leading to recovery rates almost double what they could otherwise get without CO2.

So we should be expanding CO2-EOR beyond the Weyburn and Midale Units. When they first announced the Boundary Dam project, Canadian Natural Resources Limited expressed a serious interest in acquiring the CO2 produced. They lost out to then-operator of the Weyburn Unit, Cenovus. CNRL wanted to start a CO2-EOR scheme at its Steelman unit, which makes sense, since its very similar geology to the Weyburn Unit. That would breath substantial new life into it.

But that’s not the only place CO2 would be useful. I’m willing to bet CO2 could also be useful in the Viewfield Bakken. I am aware that Crescent Point had been running a small scale pilot somewhere in southeast Saskatchewan, either there or at Torquay. But as I expect Crescent Point to sell both of those area one of these days, there’s little probability they would want to jump into a CO2 scheme for the long term. I could be wrong, but I don’t think I am.

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There’s also been a CO2 flood in the Bakken down the road to the east, just across the Manitoba border. Tundra Oil & Gas has been running its CO2 pilot in the Sinclair field, a Bakken play, for 15 years now, trucking CO2 in on a consistent basis all that time. They even applied to expand it in 2016. I don’t know what their results have been, but no one runs an experiment like that for 15 years unless a.) its working and b.) they see potential in it.

It doesn’t hurt that my pool on who might eventually buy out Crescent Point’s remaining southeast Saskatchewan holdings has Tundra as the far-and-away favourite, and in short order. And they’re the type of company that sees things from a generational perspective, not necessarily the next quarter.

So if Tundra did buy the Viewfield Bakken from Crescent Point, and if CO2 should become available from both Boundary Dam Unit 6 and Shand, you take that and add their 15 years of piloting CO2 in the Bakken, and we could score a winner.

Southern Saskatchewan has not yet figured out what the next big thing is. In northwest Saskatchewan, it’s been steam-assisted gravity drainage on heavy oil for the last decade. Maybe in southeast Saskatchewan, it’ll be the Red River formation. Who knows? But until that next big thing is found, these measures I’ve outlined above can work to at least give the Saskatchewan oilpatch a fighting chance.

The long and short of it is, when oil prices are going up, our rig count should not be going down. The provincial government needs to take a long, hard look in the mirror to see what it can do to improve the situation, within the scope of what it can control.

 

Brian Zinchuk is editor and owner of Pipeline Online. He can be reached at brian.zinchuk@pipelineonline.ca

 

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Brian Zinchuk: With oil prices now at US$94 per barrel, why is industry activity akin to when it was half that?