Category: oil field news
Published: Tuesday, 27 September 2011 02:16
Written by Administrator
GORDON PITTS - The Globe and Mail
The area is called Lost Horse Hill, but there is nary a lost horse,
or much of a hill, in sight. There is, however, a skinny metal rig where
a drilling crew is scrambling to connect an extension to the well-bore
pipe on this oil-rich patch of southeastern Saskatchewan.
from Big Sky Drilling is running more than a month behind schedule
because of this year’s heavy rains. By the time they’re through, they’ll
have drilled more than a kilometre deep, before tunnelling horizontally
for at least another kilometre, blasting away rock with a high-pressure
onslaught of water and chemicals.
The well at Lost Horse Hill, to
be operated by Calgary’s PetroBakken Energy Inc., lies along the
northern tier of the vast Bakken formation, the biggest energy pool to
be tapped in North America for 50 years. This year’s flooding is just a
hiccup in a massive energy play that is transforming the economy of
The Bakken formation, located in the
600,000-square-kilometre Williston Basin, cuts across three U.S. states
and two Canadian provinces and contains hundreds of billions of barrels
of oil. If even if a tiny percentage is recovered, it means huge
injections of jobs, capital and consumer spending into parts of the
Prairies that were largely bypassed in previous energy booms.
has emerged as one of the powerhouses in the Saskatchewan-Manitoba play
– even though this summer’s high water shut in as many as 6,000 barrels
of its daily production.
“The Bakken is still our flagship – it’s the gift that keeps on giving,” says Rene LaPrade, senior vice-president of operations.
the only thing that could slow down production in the area is the price
of oil, which has fallen 8 per cent this month and closed at $81.38
(U.S.) on Monday. But even at that level, PetroBakken is sitting
comfortably. Mr. LaPrade figures oil prices would need to drop to $50 or
$60 before it would look at pulling back.
Across the region, high
expectations are triggering explosions of activity, as trucks rumble
through the intersection of Highways 13 and 47 at Stoughton, just north
of Estevan, generating a busy lunch-time crowd at Don’s Place, a diner
where the daily special is a heart-stopping Cheese Denver sandwich.
action is captured in the forest of drilling rigs and endless pump
jacks that, amid this year’s slowly receding sloughs, seem to float on
water, giving new meaning to the term “offshore drilling.” In the U.S.
northern plains, where most of the Williston Basin is located, North
Dakota, another flood-ravaged area, is experiencing a boom that defies
the prevailing U.S. malaise. And a quarter of the basin lies in
Saskatchewan – with a smaller slice in Manitoba. Very likely, a quarter
of the Bakken energy trove is there, too.
That is the lure that
brought Clayton Leavitt, 54, the area manager for PetroBakken, back to
his first love, daily operations, after a stint in the executive suite
of another Calgary company. In the first few months on the job in
Saskatchewan, it has been a trial by flood, but he is satisfied drilling
and production are finally getting back to normal.
leases here used to be just a great big lake,” he says, as he surveys a
stretch of still-soggy land a little distant from Lost Horse Hill.
presence here is a manifestation of how Calgary capital and executive
muscle is combining with local expertise and huge resource potential to
change the economics of the region.
For local people who saw
Saskatchewan dismissed for decades as Alberta’s poor cousin – who
watched their children sucked away to better jobs in Alberta – there is
satisfaction that the Bakken is now a big driver of the Western Canadian
energy economy, and keeps the suits busy in downtown Calgary.
is carrying Calgary right now,” gibes Brent Dunnigan, an oilman in
nearby Alameda, Sask., who runs his company in partnership with a couple
That notion hit home for Mr. Leavitt, a rangy
engineer quick with a quip, who remembered Saskatchewan as “the place
you were from, not where you went to.” He found the reverse was true
when he started looking for a home in the area. It took him three months
to find a house in Estevan, the operational hub of the Canadian Bakken.
in the small Saskatchewan city, which has a population of 13,000, are
comparable with those in Calgary, he says, bemoaning the cruel fate that
forced him to sell into a soft Calgary market and buy into Estevan’s
hot scene – which persisted even though this year’s heavy rains at one
point left Estevan a virtual island.
PetroBakken also owns some
leases down in North Dakota and Montana – but Mr. LaPrade says the
Canadian Bakken geology is more consistent with a lower exploration
risk. The company has growing operations in southwestern Manitoba, where
it shares the spotlight with firms such as Tundra Oil and Gas Ltd., the
energy arm of the mighty Richardson family of Winnipeg.
operations on the Saskatchewan side are dominated by PetroBakken and
Crescent Point Energy Corp., also of Calgary, with a number of smaller
players in the mix. “Crescent Point, who are they?” asks a mock-serious
Mr. Leavitt. In fact, the two companies share some operations and are
continually bumping into each other’s leaseholds.
activity means jobs for returning Saskatchewanians – and for those who
stayed home, such as Lance Dodd, who commutes from Wapella, two hours
north of Stoughton. Mr. Dodd is a farm boy who got into the energy
business out of high school and has seen the Bakken develop from humble
beginnings. Now he is PetroBakken’s field supervisor in the region.
knew the Bakken was big, he says, but there were always cheaper places
to sink a drill. The turning point came five years ago when technology
made it economical to tap shale oil – through horizontal drilling that
cuts through tight formations, and hydraulic fracturing that bombards
the rock with water.
Yet even with the Bakken’s rise, potash is
the non-crop resource most closely identified with Saskatchewan. “It is
often said we are the Saudi Arabia of potash and it is eye-popping in
its magnitude,” says Ed Dancsok, the province’s assistant deputy
minister of energy and resources. “In oil, we are not quite as gifted as
some of our neighbours.”
Even so, oil and gas pump $1.5-billion a
year into the provincial treasury, about seven times the haul from
potash – except for one dizzying year, 2008-2009, when stratospheric
potash prices delivered $1.36-billion.
Potash clearly has a huge
upside – with a number of new mining sites in development – but the
scale of the Bakken ensures that oil will enrich the provincial treasury
far into the future. And nobody really knows how far the formation
extends, or where all the untapped pockets lie.
“We’ve got an idea
how big it is, but we keep pushing out the borders all the time,” Mr.
Dodd says, as he steers the company pickup northward toward the edges of
The lingering question is how Saskatchewan will
take advantage of this boom to build sustainable wealth. Mr. Dancsok
points out that Federated Co-operatives Ltd. is undertaking a
$1.5-billion expansion of its Regina refinery at a time when new
refinery projects are rare. The development agency Enterprise
Saskatchewan has an energy task force seeking out value-added
Perhaps a bigger worry for the region’s boom,
though, lies beyond the Bakken – the threat of a sharp recession leading
to a steep decline in oil prices.
Mr. Dancsok, the assistant
deputy minister, knows from bitter experience that commodities prices go
down as well as up. But a move to lower prices would not be all bad, he
argues, helping the key U.S. market get back on its feet.
“And we haven’t found the edge of the Bakken yet – the potential is vast.”