Genuine Black Gold
Bakken oil play sizzles despite oil price chill
Like a great date, the Bakken Formation in southeast Saskatchewan is hot, rich and much more than meets the eye. There is a promising outlook for the bad times as well as the good.
Billed by promoters as the hottest oil drilling play in North America, the Bakken in the Williston Basin is one of the largest remaining conventional pools on the continent. The total resource endowment in the fields, spread over an area of 520,000 square kilometers, is estimated at 100 billion to 400 billion barrels. About a quarter of the basin – and 25 billion to 100 billion barrels – is in Saskatchewan. If just five per cent of the minimum resource estimate proves to be recoverable, it will about double the province’s conventional oil reserves.
“To us it is an untapped gold mine for opportunity for conventional heavy oil where we can apply our technology,” says John Wright, president of Petrobank Energy and Resources Ltd., the top Bakken producer in Saskatchewan.
The Bakken fields are not new. Their discovery dates back to the 1950s. But inadequate technology and low oil prices held back production. Saskatchewan’s portion of the Bakken only produced 950 barrels per day in 2004, when the limitations began to come off. Horizontal drilling and improved “fraccing” or rock fracturing technology made a much larger proportion of the deposit recoverable at the same time as improved oil prices covered costs of introducing new methods.
“Until very recently, we had 10 rigs,” says Wright. “We drilled over 200 horizontal wells and we’re now the biggest producer out of that play.”
Petrobank and others such as Crescent Point Energy Trust increased output to 54,000 barrels per day. Bakken producers are far better able to withstand fallen energy prices than Alberta oil sands developers, Wright says.
“We will be the last man standing,” the Petrobank president predicts. “Our process has the least capital intensity and the lowest capital cost of any producers out there.”
It helps that Saskatchewan did not become “overheated” like the Alberta economy. “There is no exaggerated value placed on the person working at Tim Hortons,” says Wright.
Since the oil reserves are in farm areas, infrastructure does not have to be built from scratch. There is a road every 1.6 kilometers. A power line runs down every road. Saskatchewan has more favorable regulatory and royalty regimes than Alberta, Wright adds.
“Overall costs are lower. We think we can get more done, more efficiently. That is going to lead to a lot of investment. But it won’t be the investment of this crazy rush to build mines that you saw up in Fort McMurray.”
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