Saskatchewan heavy oil production relatively stable despite lower prices

Saskatchewan

Husky Energy Pikes Peak South Saskatchewan heavy oil project Source: Husky Energy

Husky Energy, Blackpearl Resources report operating costs as low as 8-$9USD/b

Despite lower oil prices and reduced drilling activity in western Canada since 2014, production of conventional heavy oil in Saskatchewan remained relatively stable, according to an NEB press release.

Over this period, the benchmark West Texas Intermediate (WTI) oil price dropped 53 per cent and drilling activity dropped 63 per cent, but Saskatchewan heavy oil production only dropped 18 per cent.

In fact, this production was stable in 2016 and even increased slightly in the latter half of the year.

The resilience of Saskatchewan heavy oil production is largely due to greater use of thermal production techniques similar to those used in Alberta’s in situ oil sands operations.

In 2016, steam-assisted gravity drainage (SAGD) was used in more than a dozen Saskatchewan heavy oil projects, compared to only six in 2014.

These thermal projects use industry standard SAGD technology which injects steam into horizontal wells to heat the heavy oil and allow it to flow into lower parallel wells, where it is then pumped to the surface.

Located primarily in the Lloydminster area, Saskatchewan’s thermal heavy oil projects have low decline rates and relatively low operating costs compared to other conventional production.

Producers active in the region, including Husky Energy and Blackpearl Resources, report operating costs as low as US$8-$9 per barrel and costs for new projects that would break even at a WTI price of roughly US$45 per barrel.

Since the 2nd quarter of 2015, Husky Energy has brought four projects online with a total production capability of over 40 Mb/d, which doubles the company’s average annual production from the region.

Saskatchewan heavy oil production accounts for a relatively small portion of Canadian oil production due to its fewer reserves – about 280 Mb/d in 2016 compared to 1.9 MMB/d of total Canadian heavy oil production and 3.9 MMB/d million barrels a day of oil production of all types

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For comparison, as of 2013, Saskatchewan’s oil reserves were about 8.1 billion barrels, while as of 2014, Alberta’s oil sands proven reserves were 166 billion barrels.

It is an area of conventional (i.e. non-oil sands) production that has been, and is likely to remain, relatively stable.

Posted in: Canada

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