The Encyclopedia of Saskatchewan

 

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Oil and Gas Industry

Oil-well drilling near Climax, Saskatchewan, October 1952.
Everett Baker (Saskatchewan History and Folklore Society)

Saskatchewan’s oil production is second only to Alberta among Canadian provinces, and provides about 20% of all Canadian production. The province’s daily production was 425,000 barrels/day in 2001; in comparison, the world’s largest oil exporting country, Saudi Arabia, produced on average 8.5 million barrels/day in 2001. Saskatchewan produces significant petroleum volumes from four major regions: Lloydminster, Kindersley-Kerrobert, Swift Current, and Weyburn-Estevan. The province has an 80,000 barrel/day refinery owned by Federated Co-op at Regina, an asphalt refinery at Moose Jaw, as well as two upgrading operations for heavy oil: one in Lloydminster, owned by Husky Energy, and one in Regina, owned by Federated Co-op and the province. The upgraders process heavy oil into a light synthetic oil which is easier to transport and has a higher value.

Saskatchewan is less important as a producer of natural gas. Most of the production takes place in the Swift Current region. The natural gas is predominantly dry, which means that natural gas liquids such as ethane (used in plastics and petrochemical production) and propane (used for transportation and a portable heating fuel) are not present in large quantities. The earliest exploration in Saskatchewan can be traced back to an unsuccessful effort to drill for natural gas in the 1880s in the Belle Plaine area near Regina. Exploration continued intermittently until the first commercial oil well in Saskatchewan was finally discovered in Lloydminster in 1943, but it represented only a modest discovery at the time: the Lloydminster oil was of such heavy gravity and high viscosity that it was difficult to produce, transport, and process into petroleum products.

Comparisons have been made between Alberta and Saskatchewan in terms of the rate and level of development of the oil and gas industry. Both Alberta and Saskatchewan petroleum resources were relatively late developers compared to major oil-producing regions in the Middle East, Indonesia and Texas. Major oil finds in western Canada, despite significant exploration efforts, proved elusive. The discovery of oil in Saskatchewan faced additional difficulties as compared to Alberta because less information was available about the presence of oil and gas deposits. In the early 1940s, the government of Saskatchewan provided incentives through concessions of millions of acres of exploration land for a fixed period to Imperial Oil, in return for substantial investment in exploration. Imperial Oil drilled a number of exploration wells in this period, but no commercial discoveries were made, so their concessions expired. The Alberta industry made very modest commercial discoveries in the 1920s and 1930s, but the major boom in the industry took place with the discovery of oil at Leduc in 1947.

Major commercial development of Saskatchewan oil began in the early 1950s, and by the end of the 1950s the province was a significant oil-producing region. Although Saskatchewan production has grown over the years, Alberta oil and gas production has grown even faster. Favourable geology for oil and natural gas production has been unevenly distributed in the Western Canadian Sedimentary Basin, which includes areas in BC, Alberta, Saskatchewan and Manitoba. According to the most recent projections from the National Energy Board, Alberta has the overwhelming majority of ultimately recoverable conventional oil resources in the Western Canadian Sedimentary Basin; these do not include the Alberta oilsands, where recoverable reserves about ten times as large have been discovered. In addition to oil, Alberta has an even higher proportion of ultimately recoverable natural gas resources in the Western Canada Sedimentary Basin. Saskatchewan has approximately a quarter of the ultimately recoverable conventional oil resources, and less than 5% of ultimately recoverable natural gas resources. Manitoba and BC have even more modest allocations of ultimately recoverable conventional oil resources in the Western Sedimentary Basin, with shares of 1% and 4% respectively; but BC has a more favourable allocation of natural gas (12%).

Early development of Saskatchewan oil was dominated by large integrated multi-national oil companies. In the last two decades of the 20th century, these older companies sold most of their oil wells and land rights positions, so that the majority of Saskatchewan production now comes from younger, large Canadian and American independent (non-integrated) companies. There is also considerable activity on the part of more than 100 small oil companies with operations ranging from one to a dozen wells. Oil production trends in the province have been uneven: a peak in oil production was reached in the mid-1960s, followed by a low in production in the early 1980s, and then growth towards a new peak yet to be reached. Oil production growth in the 1990s was substantial, doubling from 1990 to 2001. Output in the mid-1990s surpassed the previous peak from the 1960s. A major driver for expanded Saskatchewan oil production in the 1990s was horizontal well drilling, which dramatically increased well productivity. Widespread use of horizontal well drilling was pioneered in Saskatchewan, the Saskatchewan Research Council playing a substantial role in the research and development of that innovative technology.

In the second half of the 20th century, oil and gas production became an increasingly important part of the provincial economy, by 2001 representing 9% of the economic value created in the province and gross sales of $5.1 billion. This makes the industry only slightly less important than agriculture. Most of Saskatchewan oil production is currently exported to Minnesota and to the mid-western region of the United States, but substantial amounts are also shipped to Ontario. Saskatchewan is only a small net exporter of natural gas: relative consumption of natural gas within the province is quite high compared to the rest of Canada, as natural gas is a critical input to the province’s energy-intensive Mining, iron and steel, fertilizer, refinery, and heavy oil upgrader operations. Oil and natural gas provide a major source of government revenue through taxes on the value of production and sale of land rights. Annual revenues fluctuate depending on the international price of oil and the North American price of natural gas: from 1995 to 2000, direct oil and gas revenues ranged from a low of $500 million to over $1 billion, equal to 10-25% of all tax revenue raised in Saskatchewan.

David Hanly

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This web site was produced with financial assistance
provided by Western Economic Diversification Canada and the Government of Saskatchewan.
University of Regina Government of Canada Government of Saskatchewan Canadian Plains Research Center
Ce site Web a été conçu grâce à l'aide financière de
Diversification de l'économie de l'Ouest Canada et le gouvernement de la Saskatchewan.