There is no normal in the southeastern Saskatchewan oil patch these days. Conditions haven't approached anything near normal since last winter, but they're getting closer.
More drilling rigs are moving out onto sites that may be a bit spongy, if not soggy, but they're managing to get the work done with a little innovation and imagination it seems.
“Some operators I heard, got out to do their checks in a boat,” said Roy Schneider, a spokesman for the Ministry of Energy and Resources from their Regina office.
“Some wells were sandbagged and operators boated over but really, we haven't received any reports of anything untoward affecting wells this spring and summer, no major problems on the production side,” said Schneider. It's just the drilling and service side of the business that are facing the real challenges of late.
Dean Pylypuk, superintendent of operations for Energy and Resources out of their Estevan office, said there has been a good three-month delay in production numbers coming out of the southeast, which means that the lower volumes are just now starting to surface at the provincial levels.
“In other words, the flood numbers are just coming in now,” he said. He too is welcoming the return to near normalcy that currently sees about 50 drilling rigs plying their trade in the oil fields that surround the Estevan, Stoughton, Weyburn regions.
“Modest declines started to show up in April and May with product that had to be trucked out,” said Pylypuk. That was due to the encroaching water that was already making it difficult to get around this spring prior to the spring runoff, a late April early May snowstorm and ensuing melt plus a huge amount of rain that made travel on area grid roads a near impossibility by late May. The floods that ensued due to a massive release of reservoir water from the Rafferty and Boundary Dams in early June, pretty well put the oil patch on the shelf for another month. This was usually a period in which the industry is going out full bore following the typical modest three to six week spring road ban season. This year that modest season stretched out to include the entire spring and a good portion of the summer and is still in effect in many rural municipalities thanks to roads that are still under water.
“Some well sites are flooded, diversion channels are being built in some spots to reduce flooding near some towns and villages so that may well flood some additional sites that will have to be shut in while that happens,” said Pylypuk. He added there could be some environmental risks surfacing later if the well sites stay flooded and/or the water keeps coming. That's when mitigation steps will have to be ordered, but so far that hasn't been the case.
The return of the drilling side of the business is welcome news for agencies such as the Petroleum Services Association of Canada (PSAC) who released their third-quarter predictions July 27. They're saying that drilling activity in Saskatchewan is heading for a 17 per cent increase, floods or no floods. PSAC noted that while the southeast was under water, the rigs merely moved to dryer ground and just kept drilling. They are now returning to the southeast to resume business as usual.
PSAC revised the 2011 forecast to a total of 13,325 wells to be drilled across Canada, representing a 10 per cent increase compared with 2010. In April they had predicted that Canadian wells drilled would number 12,950. That represents a renewed forecast of an additional 375 wells.
The forecast was upped due to the fact that in the second quarter there were 176 more rigs released than what was anticipated in spite of the severe weather events in the southeast part of Saskatchewan and western Manitoba. The slack that was witnessed around this corner of the province was picked up by southwestern and northwestern projects. They just shifted to other operating areas, ensuring that activity would stay the course, said Mark Salkeld, PSAC president.
It is now predicted that Saskatchewan will be able to drill 3,273 wells, which will represent a 17 per cent increase compared with 2010, said Salkeld.
Manitoba's drilling pace will pick up as well, to 590 wells, a 14 per cent hike while Alberta will pretty well stay the course at 8,761 wells, an eight per cent increase while B.C. will show a slight two per cent increase with about 660 wells.
The rig utilization rate in Saskatchewan is the highest in Western Canada said Schneider at 69 per cent. The rig utilization rate in Alberta is at 50 per cent and 40 per cent in Manitoba.
“The oil activity in Saskatchewan and Alberta represents 87 per cent of the Canadian total, so you can see things are happening here,” said Schneider.
“There are 808 available rigs in Western Canada and as of late July, 438 of them were active including 107 of the 156 that are in Saskatchewan.”
The forecasted increase by PSAC comes as a pleasant surprise to the industry and Energy and Resources, said Schneider.
“Yes, we had a horrible spring and even into summer in a critical area, the southeast. But the rigs found dryer ground near Lloydminster and to a lesser extent Kindersley, and kept on working,” he added.
Schneider said drilling companies and regulatory agencies can probably expect ongoing problems through August and September as the industry continues to battle the water-related problems and the damaged roads. He said, “realistically, it'll be months and months yet before things get back to a semblance of normal, but you know, the good news out of all this is the fact that the oil will still be there for the taking once they can get to it.”
The number of oil and gas wells drilled in Saskatchewan this year is, quite surprisingly, ahead of last year's pace, 1,329 to 1,132 for the same time frame (up to July 11).
Of those 1,329 wells drilled, 1,305 were seeking oil while only 24 were going for the currently underpriced natural gas.
“Unless we see a dramatic price shift, I don't see that ratio changing,” said Schneider.
“There is a whole bunch of nice sweet crude still sitting in the Bakken down there and they'll still go after it and the numbers show that the water hasn't severely impacted overall production ... yet. It seems we're still in positive shape across the province and once we get the southeast back to full stream again, it could well be a banner year.”
With oil prices still topping the $90 mark (West Texas Intermediate) and with water levels now dropping in most of southeast Saskatchewan, that prediction could easily turn into a safe bet.