Saskatchewan oil drilling has totally shut down

No oil drilling rigs have been working in Saskatchewan since mid-March. Only one rig was working in July and it was drilling for helium

By
Pipeline News
July 28, 2020





Drill rigs parked in Estevan July 16
— Drill rigs parked in Estevan on July 16. | Brian Zinchuk

In recent years, up to 50 drilling rigs would be working throughout Saskatchewan as of mid-July. Nearly all would be drilling for oil.

As of July 16, there was just one rig working in Saskatchewan, and it was drilling for helium, according to Rig Locator.

No oil drilling rigs have been working in Saskatchewan since the end of the winter drilling season in mid-March.

The active drilling rig count is one of the key leading indicators of the oil industry, and this year it is indicating a near total shutdown.

 

 

Saskatchewan’s oil production went from 502,700 barrels per day (bpd) in March 2020, to 361,000 bpd in May, a decline of 28.2 per cent. When oil prices cratered in April, many oil producers shut down substantial portions of their production and all ceased drilling.

The tremendous destruction in demand for oil around the world came with the onset of the COVID-19 crisis in mid-March. This coincided with Saudi Arabia and Russia flooding the market with additional oil. In mid-April, West Texas Intermediate (WTI) oil briefly went into negative pricing territory for one day.

Since then WTI has climbed back to US$40 per barrel, but drilling has not resumed and rigs are parked throughout the Prairies.

Asked about this on July 16, Saskatchewan Minister of Energy and Resources Bronwyn Eyre said, “Remember, before COVID, we had a strong … drilling season the early days of 2020.

“It seems like an eternity ago, but 756 new wells were drilled, which was a strong Q1 for 2020 and for that winter drilling season.”

She pointed out that Saskatchewan had a higher “drilled but uncompleted” well count than other provinces at that same time. This could lead to an advantage in the future, she said, as those wells could be brought online more quickly when market conditions improve. As new wells, they will have higher initial production rates and better cash flow than existing wells.

Eyre said capital investment in exploration is expected to drop 50 per cent this year, compared to 2019, when it was $3.98 billion. This year she expects it to be closer to $2 billion.

“It's going to take some time, of course, to get back to those pre-COVID drilling numbers. Obviously, we hope the numbers are going to increase even now, going into the latter part of 2020 into the late summer and fall.

The province has announced that it has approved its first parcel of work packages to be completed through the Accelerated Site Closure Program (ASCP), a joint federal-provincial incentive.

A total of 22 packages will engage up to 50 service companies and spread out the work for abandonment activities across the Lloydminster, Kindersley, Swift Current and Estevan areas. The work includes around 300 well abandonments, 300 flowline abandonments, 75 facility decommissions and 700 other activities related to site reclamation, a government press release said.

The value of this first tranche of work packages is $12 million and encompasses six different oil and gas companies. Saskatchewan has been allotted $400 million from the federal government for the program.


Copyright © Western Investor

Email to a Friend

Close
Most Popular
Get the WesternInvestor.com Newsletter