Continued high prices for oil and gas production, and at least three billion barrels of recoverable oil using current technologies, translates into a positive outlook for the future of the industry in Saskatchewan, said the vice-president of operations for Arc Resources Ltd. in Weyburn Wednesday.

"There's a big prize left in Saskatchewan even after 50 years of production," said Myron Stadnyk.

He spoke at a luncheon seminar held during the 10th biennial Saskatchewan Oil Show at the Exhibition Grounds on Wednesday and Thursday.

Stadnyk said demand from Canada's next door neighbour is expected to remain high for the province's oil and gas.

The U.S. consumes 20 billion barrels of oil per day - out of 75 mmbbls/day produced in the world - and produces only 5.5 billion barrels from its own declining fields. Canada is the third largest exporter to the U.S., at a rate of 1.4 million barrels per day, or 15 per cent of U.S. oil imports.

The U.S. also relies on Canada for 94 per cent of its natural gas, which will remain a continental industry because the product can't be shipped, he said.

Inventories of both commodities in the U.S. are well below the normal five-year range, with a significant investment needed to develop the large basins in the Middle East and Russia and higher costs, in some countries, because of political instability, he said.

Meanwhile, the economies in China and India are expected to grow by seven to nine per cent a year over the next few years, leading to higher energy consumption, he noted.

"The bottom line are the future prices the market will pay," said Stadnyk. "A price of $24/bbl West Texas Intermediate is available into 2005. On Monday, oil was up $1 per bbl and $24 WTI was available into 2007," he said.

Stadnyk said a similar situation exists for natural gas. "We see continued price strengths in gas prices. On Monday, Nymex was $4.82 out to 2007-8. Natural gas is now a premium fuel," he said.

Saskatchewan produces 418,000 barrels per day of crude oil and 658 million cubic feet of natural gas per day as the second-largest crude oil producer and the third-largest natural gas producer in Canada.

Stadnyk said the capital investment in the province was $1.7 billion in 2001, showing a "fantastic" growth as oil production has doubled and gas production tripled in the past 10 years.

"There's been a huge leap in the number of gas wells drilled (in Saskatchewan)."

There are bearish factors to consider, however, he said.

One is the fact that production is going back up in places like Russia. Russia's production dropped to five million barrels a day after a high of 11 mmbbls but is back up to eight mmbbls, he said.

Also, consumption in the U.S. and Europe is moderating with current economic conditions and the increased focus on energy efficiency, and there is an abundance of crude in key world basins, he said.

Another factor to consider is the increased cost, worldwide, of finding and developing both oil and gas, he said.

Those costs are over $12 per barrel of oil and over $12.60 BOE for natural gas in the western Canadian sedimentary basin. (BOE is the natural gas equivalent to a barrel of oil). Higher prices are required to sustain the supply of crude with those costs, he said.