The area is called Lost Horse Hill, but there is nary a lost horse, or much of a hill, in sight. There is, however, a skinny metal rig where a drilling crew is scrambling to connect an extension to the well-bore pipe on this oil-rich patch of southeastern Saskatchewan.
The team from Big Sky Drilling is running more than a month behind schedule because of this year’s heavy rains. By the time they’re through, they’ll have drilled more than a kilometre deep, before tunnelling horizontally for at least another kilometre, blasting away rock with a high-pressure onslaught of water and chemicals.
The well at Lost Horse Hill, to be operated by Calgary’s PetroBakken Energy Inc., lies along the northern tier of the vast Bakken formation, the biggest energy pool to be tapped in North America for 50 years. This year’s flooding is just a hiccup in a massive energy play that is transforming the economy of Middle Canada.
The Bakken formation, located in the 600,000-square-kilometre Williston Basin, cuts across three U.S. states and two Canadian provinces and contains hundreds of billions of barrels of oil. If even if a tiny percentage is recovered, it means huge injections of jobs, capital and consumer spending into parts of the Prairies that were largely bypassed in previous energy booms.
PetroBakken has emerged as one of the powerhouses in the Saskatchewan-Manitoba play – even though this summer’s high water shut in as many as 6,000 barrels of its daily production.
“The Bakken is still our flagship – it’s the gift that keeps on giving,” says Rene LaPrade, senior vice-president of operations.
About the only thing that could slow down production in the area is the price of oil, which has fallen 8 per cent this month and closed at $81.38 (U.S.) on Monday. But even at that level, PetroBakken is sitting comfortably. Mr. LaPrade figures oil prices would need to drop to $50 or $60 before it would look at pulling back.
Across the region, high expectations are triggering explosions of activity, as trucks rumble through the intersection of Highways 13 and 47 at Stoughton, just north of Estevan, generating a busy lunch-time crowd at Don’s Place, a diner where the daily special is a heart-stopping Cheese Denver sandwich.
The action is captured in the forest of drilling rigs and endless pump jacks that, amid this year’s slowly receding sloughs, seem to float on water, giving new meaning to the term “offshore drilling.” In the U.S. northern plains, where most of the Williston Basin is located, North Dakota, another flood-ravaged area, is experiencing a boom that defies the prevailing U.S. malaise. And a quarter of the basin lies in Saskatchewan – with a smaller slice in Manitoba. Very likely, a quarter of the Bakken energy trove is there, too.
That is the lure that brought Clayton Leavitt, 54, the area manager for PetroBakken, back to his first love, daily operations, after a stint in the executive suite of another Calgary company. In the first few months on the job in Saskatchewan, it has been a trial by flood, but he is satisfied drilling and production are finally getting back to normal.
“All the leases here used to be just a great big lake,” he says, as he surveys a stretch of still-soggy land a little distant from Lost Horse Hill.
His presence here is a manifestation of how Calgary capital and executive muscle is combining with local expertise and huge resource potential to change the economics of the region.
For local people who saw Saskatchewan dismissed for decades as Alberta’s poor cousin – who watched their children sucked away to better jobs in Alberta – there is satisfaction that the Bakken is now a big driver of the Western Canadian energy economy, and keeps the suits busy in downtown Calgary.
“Saskatchewan is carrying Calgary right now,” gibes Brent Dunnigan, an oilman in nearby Alameda, Sask., who runs his company in partnership with a couple of Calgarians.
That notion hit home for Mr. Leavitt, a rangy engineer quick with a quip, who remembered Saskatchewan as “the place you were from, not where you went to.” He found the reverse was true when he started looking for a home in the area. It took him three months to find a house in Estevan, the operational hub of the Canadian Bakken.
Prices in the small Saskatchewan city, which has a population of 13,000, are comparable with those in Calgary, he says, bemoaning the cruel fate that forced him to sell into a soft Calgary market and buy into Estevan’s hot scene – which persisted even though this year’s heavy rains at one point left Estevan a virtual island.
PetroBakken also owns some leases down in North Dakota and Montana – but Mr. LaPrade says the Canadian Bakken geology is more consistent with a lower exploration risk. The company has growing operations in southwestern Manitoba, where it shares the spotlight with firms such as Tundra Oil and Gas Ltd., the energy arm of the mighty Richardson family of Winnipeg.
Oil operations on the Saskatchewan side are dominated by PetroBakken and Crescent Point Energy Corp., also of Calgary, with a number of smaller players in the mix. “Crescent Point, who are they?” asks a mock-serious Mr. Leavitt. In fact, the two companies share some operations and are continually bumping into each other’s leaseholds.
All this activity means jobs for returning Saskatchewanians – and for those who stayed home, such as Lance Dodd, who commutes from Wapella, two hours north of Stoughton. Mr. Dodd is a farm boy who got into the energy business out of high school and has seen the Bakken develop from humble beginnings. Now he is PetroBakken’s field supervisor in the region.
Everyone knew the Bakken was big, he says, but there were always cheaper places to sink a drill. The turning point came five years ago when technology made it economical to tap shale oil – through horizontal drilling that cuts through tight formations, and hydraulic fracturing that bombards the rock with water.
Yet even with the Bakken’s rise, potash is the non-crop resource most closely identified with Saskatchewan. “It is often said we are the Saudi Arabia of potash and it is eye-popping in its magnitude,” says Ed Dancsok, the province’s assistant deputy minister of energy and resources. “In oil, we are not quite as gifted as some of our neighbours.”
Even so, oil and gas pump $1.5-billion a year into the provincial treasury, about seven times the haul from potash – except for one dizzying year, 2008-2009, when stratospheric potash prices delivered $1.36-billion.
Potash clearly has a huge upside – with a number of new mining sites in development – but the scale of the Bakken ensures that oil will enrich the provincial treasury far into the future. And nobody really knows how far the formation extends, or where all the untapped pockets lie.
“We’ve got an idea how big it is, but we keep pushing out the borders all the time,” Mr. Dodd says, as he steers the company pickup northward toward the edges of the formation.
The lingering question is how Saskatchewan will take advantage of this boom to build sustainable wealth. Mr. Dancsok points out that Federated Co-operatives Ltd. is undertaking a $1.5-billion expansion of its Regina refinery at a time when new refinery projects are rare. The development agency Enterprise Saskatchewan has an energy task force seeking out value-added opportunities.
Perhaps a bigger worry for the region’s boom, though, lies beyond the Bakken – the threat of a sharp recession leading to a steep decline in oil prices.
Mr. Dancsok, the assistant deputy minister, knows from bitter experience that commodities prices go down as well as up. But a move to lower prices would not be all bad, he argues, helping the key U.S. market get back on its feet.
“And we haven’t found the edge of the Bakken yet – the potential is vast.”Report Typo/Error