13th Biennial Saskatchewan Oil & Gas Show

SaskatchewanO I L & G A S S H O W

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A SUPPLEMENT TO:

Saskatchewan nowFor many petroleum producers, the wheat province offers more drilling appeal than Alberta

When the going gets toughTwo southeastern Oilmen of the Year recount how theyve handled bad times

P R O D U C T I V I T Y O P T I M I Z I N G

Improvingdrillingperformance

Safeguardingdownholeassets

Enhancingproduction

Reducingenvironmentalimpact

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ProductivityEnvironmental

SolutionsProduction

TechnologiesDrilling

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PRESIDENT & CEOBill Whitelaw [email protected]

PUBLISHERAgnes Zalewski [email protected]

EDITORIAL DIRECTORStephen Marsters [email protected]

EDITORIALMANAGING EDITOR EDMONTON Chaz Osburn

[email protected] Mike Byfield

[email protected] ASSISTANCE Joseph Caouette, Ryan Gullage,

Marisa Kurlovich

[email protected] Jacqueline Louie,

Darrell Stonehouse

CREATIVEPRINT, PREPRESS & Michael Gaffney

PRODUCTION MANAGER [email protected] MANAGER Audrey Sprinkle

[email protected] SUPERVISOR Rianne Stewart

[email protected] SERVICES SUPERVISOR Matt Davis

[email protected] DESIGNER Cathlene Ozubko

[email protected] SERVICES Rawan Kemaldean, Alanna Staver

[email protected] Geoff Lee, Joey Podlubny,

Brian Zinchuk

SALESDIRECTOR OF SALES Rob Pentney

[email protected] MANAGERMAGAZINES Maurya Sokolon

[email protected] ACCOUNT EXECUTIVE Diana Signorile

[email protected] MANAGERS Jerry Chrunik

[email protected] Nick [email protected] Michael [email protected] Rhonda [email protected] [email protected] [email protected] Bonnie [email protected]

SALES ADMINISTRATOR Jane [email protected]

AD TRAFFIC COORDINATOR Alanna [email protected]

SALES & MARKETINGSENIOR MARKETING COORDINATOR Alaina Dodge-Foulger

[email protected] / TRADE SHOW Ryan Mischiek

COORDINATOR [email protected] DESIGNER Cristian Ureta

[email protected]

O FF I CES

C A L G A R Y D O W N T O W N : C A L G A R Y N O R T H : E D M O N T O N :300, 999 - 8 Street S.W., 300, 5735 - 7 Street N.E., 6111 - 91 Street N.W.,Calgary, Alberta T2R 1N7 Calgary, Alberta T2E 8V3 Edmonton, Alberta T6E 6V6Tel: 403.209.3500 Tel: 403.265.3700 Tel: 780.944.9333Fax: 403.245.8666 Fax: 403.265.3706 Fax: 780.944.9500Toll-Free: 1.800.387.2446 Toll-Free: 1.888.563.2946 Toll-Free: 1.800.563.2946

Oil & Gas Inquirer is owned by JuneWarren-Nickles Energy Group and is published monthly.

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We acknolwedge the financial support of the Government of Canada through the Canada Magazine fund towards our editorial costs.

DEPARTMENTS5 EDITORS NOTE

7 WELCOME MESSAGES

10 WORLD ENERGY OUTLOOK Despite alternative energy and conservation,

humanitys reliance on hydrocarbons and uranium will likely increase

FEATURES12 SASKATCHEWAN NOW

For many petroleum producers, the wheat province offers more drilling appeal than Alberta

BY MIKE BYFIELD

21 WHEN THE GOING GETS TOUGH Two southeastern Oilmen of the Year recount how

theyve handled bad times

BY JACQUELINE LOUIE

26 HEAVY CRUDE Rx The Petroleum Technology Research Centre

develops ways to recover billions of additional barrels

BY DARRELL STONEHOUSE

33 BETTING ON BITUMEN Oilsands Quest, a junior with a huge resource, keeps

moving ahead

BY MIKE BYFIELD

SHOW INFORMATION37 FLOOR PLANS

43 SCHEDULE OF EVENTS

45 EXHIBITOR LISTINGS

Cover design by Bill Harris

4 S A S K A T C H E W A N O I L & G A S S H O W 2 0 0 9

T A B L E O F C O N T E N T S

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Saskatchewans oilpatch has plenty to show off

Welcome to the Saskatchewan Oil & Gas Show, whose 323 booths were sold out back in

January. More than 30,000 visitors will examine the products of 228 exhibitors. That

crowd will include oil and gas folk, along with plenty of farmers and other residents from

southeastern Saskatchewan. The Global Petroleum Show in Calgary attracts 60,000 regis-

tered attendees, but Weyburns exhibition prompts the energy industrys neighbours take a

good look at its equipment and operating technologies.

Community is what the Saskatchewan trade fair is all about. The Weyburn Oil Show

Board, a volunteer group, has staged the event on alternate years since 1985. But the oil-

patch actually arrived in this area much earlier. The first significant exploration was under-

taken by a subsidiary of Imperial Oil, which drilled a dry hole to a depth of 2,426 metres in

1942. The first crude oil production came in 1952 from a 700-metre well into the Jurassic/

Cretaceous, Tidewater Imperial Wapella 9-33-14-1W2.

Because much of the land in the area is freehold, land agents swarmed to Estevan in the

early 1950s, negotiating leases with farmers at wedding receptions and pretty much any-

where else they could be found. The southeastern play grew stronger legs in 1953 when the

first Mississippian formation oil production came on stream from the well Central Leduc

Oil Hoffer 5-30-1-15W2.

In 1985, two companies famous for wildcat explorationHome Oil and Dome

Petroleumdrilled what is still southeastern Saskatchewans deepest well at 3394.9

metres. Four years later, Shell Canada drilled the first horizontal well in the area, ushering

in a new era of technology. The longest well to date was Oklahoma Continental Resources

Inc. Lake Alma HZ 1A3-24-3C15-23-1-17W2, drilled in 2004 to 4,800 metres.

Southeastern Saskatchewan rose to fame among North American investors with the

development of multi-stage fracturing in horizontal wells. Two junior companies teamed

up to create this pioneering breakthough: Petrobank Energy and Resources Ltd. and

Packers Plus Energy Services Inc. By cracking the underground reservoir quickly and eco-

nomically along a horizontal wellbore, operators can draw light crude oil from the tight

rock of the Bakken formation (which liquids can barely flow through in its natural state).

The Bakken could have oil in place totalling 25 billion to 100 billion barrels. That

stunning estimate comes from Ed Dancsok, director of the geology and petroleum lands

branch for the Saskatchewan Ministry of Energy and Resources. A big question mark,

Dancsok explains, is whether the Bakken formation is evenly distributed throughout the

regional basin.

Whatever the correct figure ultimately proves to be, the Bakken is the hottest oil play in

Canada today. Multi-stage fracs are already yielding results elsewhere in the province and

far beyond. That success is a tribute to the men and women whose skills and technologies

are on display at the 13th Biennial Saskatchewan Oil & Gas Show. More than ever, its time

for the energy industry to strut its stuff. See you at the show.

Mike Byfield

[email protected]

S A S K A T C H E W A N O I L & G A S S H O W 2 0 0 9 5

E D I T O R S N O T E

Saskatchewan is full of energy opportunity.

We have 41.2 billion barrels of conventional oil

in place and exciting potential in natural gas,

the Bakken Formation, heavy oil and oil sands.

Were also on the leading edge of new research

into enhanced oil recovery and carbon dioxide

capture and storage.

One place

Billions of barrels

Limitless opportunities

Come see what we have to offer, and explore your next big opportunity with us. To learn more, visit our website at www.er.gov.sk.ca or contact us at 200 2101 Scarth Street, Regina, Saskatchewan, Canada S4P 2H9 or e-mail [email protected]

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Welcome from

On behalf of the Government of Saskatchewan, I am pleased to welcome you to the

city of Weyburn for the 2009 Saskatchewan Oil & Gas Show.

Saskatchewans oil and gas industry is an integral component of our provinces

diverse economy. As we find ourselves well into a new year and a new global eco-

nomic situation, the amount of activity and enthusiasm in the industry continues to

be robust province-wide.

Our people, expertise, and innovation give Saskatchewan a significant advan-

tage over others in this continually competitive and dynamic sector. Looking to the

future, we are confident that Saskatchewan will remain well-positioned for further

growth, exploration, and development.

This show provides an excellent opportunity for representatives from the service

and supply sector of the industry to display the latest technology and equipment

available, as well as to gain knowledge and network through major industry

seminars. I offer my special thanks to the Weyburn Oil Show Board, JuneWarren-

Nickles Energy Group, as well as all sponsors for making this important biennial

event possible.

Once again, welcome to all attendees and best wishes for a rewarding show.

Brad Wall

Premier of Saskatchewan

PREMIER OF SASKATCHEWAN

BRAD WALL

As Saskatchewans Minister of Energy and Resources, I am very pleased to welcome

everyone attending the 2009 Saskatchewan Oil & Gas Show.

Our oil and gas industry is one of the key drivers of Saskatchewans economy,

accounting for billions of dollars in investment and more than 30,000 direct and

indirect jobs. Oil production is at record levels, were home to the hottest oil

play in North America, and we have exciting potential in natural gas, heavy oil,

and oilsands.

This show shines a spotlight on industry excellencefrom equipment and new

technology to best practices and industry innovation. It is also a meeting place for

all those who lead and contribute to a dynamic industry.

Enjoy the show, and learn why Saskatchewan has the number 1 economy

in Canada!

Bill Boyd

Minister of Energy and ResourcesSASKATCHEWAN MINISTEROF ENERGY AND RESOURCES

BILL BOYD

L E T T E R S


Welcome from

On behalf of the constituents of WeyburnBig Muddy, it is my pleasure to welcome

you to the 13th Biennial Saskatchewan Oil & Gas Show.

Since its inception, the Saskatchewan Oil & Gas Show has become one of the pre-

eminent showcases in all of North America for this vital sector.

This years show provides a venue to see the opportunities and innovations

that will keep this industry a strong and important part of our local and provincial

economy.

It will also give us the chance to celebrate the oil and gas industrys record-

setting year experienced in 2008. This strong resource sector is an important con-

tributor to the economic growth we are seeing in Saskatchewan. The oil and gas

industry was a major reason our province led Canada in so many economic indica-

tors in 2008, and why we are poised to lead the nation again in 2009.

On behalf of the people of WeyburnBig Muddy, I wish to extend my congratula-

tions to the Weyburn Oil Show Board and volunteers, and to those who will be rec-

ognized for their contributions in the oilpatch.

Dustin Duncan

MLA, WeyburnBig Muddy

MLA, WEYBURNBIG MUDDY

DUSTIN DUNCAN

As Mayor for the City of Weyburn it gives me great delight on behalf of City Council

and the citizens and business community to extend a warm welcome to all those

participating in the 2009 Saskatchewan Oil & Gas Show. It is our sincere pleasure to

once again host this special event in Weyburn, the Opportunity City!

While in Weyburn, we hope you will take advantage of the services offered by

our merchants, renew old acquaintances, and strike up new friendships.

We are very proud of our beautiful city and wish to thank those involved in the

oil and gas industry for your continued support.

Please, make yourselves at home and enjoy your stay with us.

Debra Button

Mayor, City of Weyburn

MAYOR, CITY OF WEYBURN

DEBRA BUTTON

L E T T E R S


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Pressure Range 0 to 20680 kPa (0 to 3000 PSI)

-46C to 85C (-50F to 185F)

2 NPT process connection

On/off control coupled with pressure transmitting

Dual high and low set points using two independentprogrammable relays

Variable time delay of 0 to 99 seconds

Programmable dead band

User controlled automatic and manual reset options

Programmable normally-open/normally-closed,independent on each relay

User interface/programming can be performed live inhazardous environments

Power options: 12 & 24V DC and 120V AC

Designed to meet:

ANSI/ISA-12.27.01 ASME B31.3

CSA C22.2 No. 30 (Class 1 Division 1 & 2, Group DLocations)

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T he International Energy Agency (IEA) represents a consortium of 28 nations, most of them net importers of fuel. The Paris-based organization has good

news for Saskatchewans producers of crude

oil, natural gas, uranium, and coal. Even if

energy efficiency and alternative fuels are

aggressively developed between now and

2030, world consumption of this provinces

primary fuels will increase substantially.

The IEA membership amounts to a roll

call of the worlds richest energy consuming

countries, so its staff of 190 has no particu-

lar bias in favour of high prices or tight sup-

plies. Even so, the reference case scenario

in IEA World Energy Outlook 2008 antici-

pates steadily rising crude consumption

on a global basis. Equally important, the

agency expects an increasing dependence

on oil from the Organization of Petroleum

Exporting Countries. (See accompanying

graphs on this page.)

IrreplaceableDespite alternative energy and conservation, humanitys reliance on hydrocarbons and uranium will likely increase

The IEA believes the increased output

of oil, natural gas, and coal over the next

couple of decades will come overwhelm-

ingly from outside the Organisation for

Economic Co-operation and Development.

(The OECD is a club of industrialized

nations.) The energy supply tilt toward

non-OECD countries has important

economic and political implications,

according to the IEA. Its forecast is all the

more credible because by far the greatest

increases in hydrocarbon production since

1980 have already come from non-OECD

states like Russia.

World Energy Outlook 2008 frankly

states that its own reference case scen-

ario amounts to an evolution that cannot

be sustained over the long haul. In part,

the IEA fears that the accumulation of

greenhouse gases like carbon dioxide in

the atmosphere will lead to unacceptable

levels of global warming. So the agency

came up with an alternate future scen-

ario based on stiffer energy conservation,

higher levies on carbon dioxide emissions,

and similar measures. Although those

policies would slash energy consumption

compared to the reference case, the world

would theoretically still require 12 mil-

lion additional barrels of crude daily from

OPEC sources by 2030.

In either the reference case or its most

conservationist scenario, World Energy

Outlook 2008 predicts rising consumption

of natural gas, uranium, and coal. That

forecast, if correct, would simply be a con-

tinuance of global energy patterns between

1980 and 2006. And what about biomass

fuels, wind, solar, and other renewable

sources? The IEA report expects these

energy forms to contribute more substan-

tially by 2030, butagain under all of its

scenariostheir role will remain a modest

fraction of hydrocarbon consumption.

OECD/IEA - 2008

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

1980 1990 2000 2010 2020 2030

Mto

e

Other renewables

Hydro

Nuclear

Biomass

Gas

Coal

Oil

World energy demand expands by 45% between now and 2030an average rate of increaseof 1.6% per yearwith coal accounting for more than a third of the overall rise.

World primary energy demand in theReference Scenario: this is unsustainable!

WorldEnergyOutlook2008

WorldEnergyOutlook2008

OECD/IEA - 2008

Total oil production in 2030 byscenario

Curbing CO2 emissions would improve energy security by cutting demand for fossil fuels, buteven in the Less CO2 Policy Scenario, OPEC production increases by 12 mb/d from 2007 to 2030.

0

20

40

60

80

100

120

2007 Reference Scenario2030

Least CO2 PolicyScenario 2030

Less CO2 PolicyScenario 2030

Non-OPECOPEC

9 mb/d16 mb/d

mb/

d


W O R L D E N E R G Y O U T L O O K 2 0 0 8

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For many petroleum producers, the wheat province offers more drilling appeal than Alberta

BY MIKE BYFIELD

NOWSaskatchewan

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S A S K A T C H E W A N O I L & G A S S H O W 2 0 0 912

Despite the price weakness thats hobbling the petroleum sector this year, Saskatchewans long-term strength as an energy producer has

improved remarkably, particularly relative

to neighbouring Alberta. From a private

sector perspective, the wheat provinces

advantages include:

Attractive conventional crude and nat-

ural gas prospects, along with a promis-

ing bitumen development.

Two political parties whose leaders

Saskatchewan Party Premier Brad Wall

and former New Democratic premier

Lorne Calverthave both earned

the respect and trust of many energy

producers.

A stable oil and gas royalty regime that

has evolved through several govern-

ment regimes in harmony with the pri-

vate sector.

A regulatory structure that delivers

timely decisions and whose adminis-

trators earn high marks from energy

companies for prompt, intelligent

cooperation.

Landowners and other citizens who typ-

ically work well with oil and gas produ-

cers to the benefit of all stakeholders.

Over time, the Saskatchewan gov-

ernment slowly learned how to create

wealth through its oil and gas resources.

Unfortunately, the Alberta government

gradually forgot the same lessons, says Bill

Dutton, an Estevan-bred oilman and for-

mer president of the Small Explorers and

Producers Association of Canada (SEPAC).

A Calgary colleague (speaking on the con-

dition that his name not be used) makes the

same point more harshly: Alberta grew

so fat on oil and gas revenues that people

began to believe they didnt need to cooper-

ate with the oil and gas industry. >

13S A S K A T C H E W A N O I L & G A S S H O W 2 0 0 9

S A S K A T C H E W A N N O W

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Alberta has made three major adjust-

ments to an oil and gas royalty regime that

came into effect on Jan. 1. Despite those

mostly temporary changes, however, the

provincial government still insists that its

basic royalty model will remain in place for

the long term. Beyond royalties, many pet-

roleum managers regard Albertas complex

energy regulations as too costly in terms

of time, money, and uncertainty. One com-

pany presidenta veteran of many policy

committees and government liaison meet-

ingsprivately says the leaders of Albertas

mainline parties (Tories, Liberals, and NDP)

seem basically unfriendly to oil and gas

investment, especially outside the oilsands.

Ironically, Saskatchewan today has

many characteristics of Alberta during

its oil and gas glory days. Our values are

determined by our past poverty. Here the

impulse toward social cooperation in the

face of difficulties is still strong, com-

ments Eric Howe, an economist from the

University of Saskatchewan. He thinks that

the cooperative impulse probably makes it

easier for resource producers to work with

Saskatchewans government and

public stand tall in the eyes of oil and gas

companies.

PHO

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landowners and other stakeholders in the

province. Were experiencing a classic

resources-driven boom in oil, gas, uranium,

potash, and other minerals. People want

to see that prosperity continue, comments

the U of S professor.

Saskatchewan still has more jobs than

available workers, to the point that the gov-

ernment continues advertising in Ontario

for skilled migrants. Weve been insu-

lated from the global recession, Howe

says. Low-paid service employment has

actually declined because so many individ-

uals have secured better-paying jobs thanks

to resource development. Most careful

economists predict that Saskatchewans

gross domestic product will grow in 2009,

the Saskatoon-based academic reports, and

he personally expects a global economic

recovery to begin in 2010. If Im wrong,

then we could see more unemployment in

Saskatchewan next year, Howe cautions.

Saskatchewans field activity is slowing down due to lower oil prices.

Saskatchewans upstream oil and gas

developers operate mainly in the southeast,

southwest, west central, and northwest

regionsall rural areas with fairly sparse

populations. Al Evans, executive director of

the Saskatoon-based Prairie Policy Centre,

says farm-bred attitudes still prevail in

the countryside. Agricultural families

sometimes have their differences with oil

and gas developers, but they can usually

work together philosophically as long as

both sides respect each others concerns,

Evans says.

Urban-minded acreage ownerswho

sometimes oppose even well-managed

resource operations for lifestyle reasons

have proliferated across southern and

central Alberta. For decades, the Energy

Resources Conservation Board (ERCB) has

warned that increasing population density

triggers more conflicts between petrol-

eum rights holders and their neighbours,

and that thesis has become a reality. In

Saskatchewan, landowner friction remains

minimal, enhancing the provinces appeal

for oil and gas investment. >PHO

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Saskatchewans hottest hydrocarbon

play continues to be the Bakken tight oil

formation in the southeast corner of the

province. Crescent Point Energy Trust cal-

culates that it can earn a good return on its

best Bakken wells even when light crude

prices drop as low as US$30 per barrel.

Scott Saxberg, the trusts president and

CEO, says, Our view is [the Bakken] is the

highest netback, lowest cost, lowest roy-

alty production in western Canada and we

would probably say in North America.

As this magazine went to press, West

Texas Intermediate was fetching more than

US$50 per barrel. Lorne Swalm, president

and CEO of Reece Energy Exploration

Corp., says, I believe that the Bakken activ-

ity in the non-risky known areas will still

work in the present environment, due to a

number of factors. For instance, its high-

quality light oil thats close to market, its

a low-risk development play, and it offers

a long reserve life index, so there are good

reserve adds.

Reece, which was recently acquired for a

premium price by Penn West Energy Trust,

also operates in the Kindersley area of

west-central Saskatchewan. Reece finance

VP Ron Stuckert says producers are defin-

itely cutting their capital spending across

Saskatchewan. Saskatchewans land sale

in February drew a paltry $6.3 million in

revenue, a stark contrast to the $197 million

from the provinces first auction of 2008.

The active rig count was just 11 as of March

23 this year, versus 63 a year earlier.

Ken and Evelyn Dyck have run Swift

Machine and Welding Ltd. in Swift Current

since 1979. More companies are inclined

to repair equipment rather than replace it

when their budgets are tight, which is good

for us, she says. The eight-person com-

pany, whose work relates to oil production

rather than exploration, has not downsized.

There have been layoffs around here, but

labour rates have not come down, Dyck

says. Housing was booming in this area a

year ago, now no one is buying, and you see

far fewer people shopping aggressively.

(For other reports on oil and gas activity in

Saskatchewan, see When the going gets

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In a financially stressful time,

Saskatchewans petroleum operators take

heart from the belief that their govern-

ment will continue to lend a sympathetic

ear to their concerns. Dutton says reason-

able royalties, coupled to an oil-prone

geology, make the province far, far more

attractive than Alberta. He adds that

Saskatchewans current climate of confi-

dence between government and industry

is far from accidental. Rather, that mutual

trust springs from constant effort by entre-

preneurs like himself within a province

that investors once considered a political

plague zone.

Dutton began his career as a battery

operator in the field, then worked his way

toward developing several junior produc-

tion companies. The crown jewel was Upton

Resources, the provinces largest home-

grown oil producer for a period. Upton

topped daily production of 5,000 barrels per

day before being acquired in 2004 for about

$75 million. Its semi-retired founder, now

76, still drills about one horizontal well per

year at a cost of $1.5 million or more.

Under financial pressure, producers tend to repair more equipment rather than replace.

>



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During bad times, the Saskatchewan

oilman went to work as a consultant in

the United States, working as a far south

as Louisiana. He vividly remembers the

mid-1970s, when relations between the

petroleum sector and province reached an

abysmal low. Then-premier Allan Blakeney,

a New Democrat, imposed high royalty

rates on crude and threatened to expropri-

ate 50 per cent of the potash sector. His gov-

ernment eventually acquired 40 per cent of

that industry, and also created SaskOil as a

Crown corporation.

For a time, Saskatchewans royalty rate

became 100 per cent above a certain price

point refusing, recalls Dutton, noting that

the equally revenue-hungry government in

Ottawa refused to allow those provincial

royalties to be deducted from a producers

federally taxable income. Everyone quit

drilling and left the province, he says.

The situation grew even worse in 1980,

when the federal government introduced

the National Energy Program (NEP) and

deliberately drove foreign investors away

from Canadas oil and gas sector. But as

the proverb says, its an ill wind that blows

no good. Although the NEP did far more

damage than good for both the petroleum

industry and taxpayers, it did enable Dutton

to become an operator. Because the produc-

tion specialist was already supervising wells

near Estevan for an American independent,

the company found it convenient to

sell those assets to him when it retreated

from Canada.

In 1982, Grant Devine became

Saskatchewans first Conservative premier,

during a period of price collapses for energy

and agricultural commodities. Dutton and

other Saskatchewan oilmen lobbied the

market-friendly Tories, presenting a list of

21 or 22 proposed policy changes for their

industry. The energy minister was Colin

Thatcher at the time [later convicted of

murdering his wife]. He adapted 18 or 19 of

our suggestions, and most of those policies

are still in place, he says.

The Blakeney and Devine regimes

left Saskatchewan deeply mired in debt.

The New Democrats returned to power,

initially under Roy Romanow (premier

from 1991 to 2001) followed by Lorne

Calvert. Both leaders proved fiscally

responsible, fending off hard-core social-

ists within their party and gradually

taming the provincial debt. Romanow

earned an ovation at the Calgary

Petroleum Club when he spoke frankly in

favour of private investment and reason-

able profitability. SaskOil, partially pri-

vatized in 1986, was sold off altogether

in 1996. In 2002, Calvert introduced an

important royalty holiday for horizontal wells.

This province is weathering the cur-

rent economic storm better than most of the

world thanks in a large measure to three

major public policy decisions, comments

the Prairie Policy Centres Evans. The

first was the Devine governments deci-

sion to privatize the Potash Corporation of

Saskatchewan in 1989. Second, Romanow

opted to privatize Cameco in 1991.

[Cameco, formed through the merger of

federal and provincial Crown corporations

in 1988, is the worlds largest uranium min-

ing firm.] The third, and some would argue

the most significant, move was Calverts

decision to reduce oil royalty fees and both

personal and corporate income taxes.

In 2007, the Saskatchewan Party (cre-

ated 10 years earlier through an alliance of

Conservatives and Liberals) came to power.

Premier Brad Wall won plaudits from the

oil and gas sector when he categorically

refused to raise royalty rates. Although

Wall has positioned himself as a centrist in

his provinces political spectrum, market-

oriented conservatives hope he will fur-

ther reduce the exceptionally large fleet of

Crown corporations. The Saskatchewan

economy is still dominated by govern-

ment unlike any other province in Canada,

Evans points out.

Saskatchewans public support for hori-

zontal drilling bore rich dividends when

Petrobank Energy and Resources Ltd. pion-

eered the multi-stage fracturing technol-

ogy that brought the Bakken formation

into profitable production on a large scale.

After so many difficulties, its really satis-

fying to see that Saskatchewans energy

policies now make good sense, Dutton

says. The key to this business is hanging on

through the bad times until things get bet-

ter. For the right person, even the challen-

ging moments can be fun.

Four Saskatchewan premiers have gradually built a firm foundation for oil and gas activity.

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R ough patches in the oilpatch dont frighten Ken Cugnet and Jim Boettcher, co-recipients of the 2007 Southeast Saskatchewan Oilman of the Year Award.

My personal attitude is, tough times make

for tougher people, says Cugnet, president of

Valleyview Petroleums Ltd. Boettcher, pres-

ident of Three Star Trucking Ltd., says todays

downturn should be kept in perspective. In

1969, we didnt even have enough work to

keep one truck busy, the 71-year-old vet-

eran recalls.

No layoffs have occurred at

Valleyview, a junior based in

Weyburn, nor has Cugnet

heard of layoffs at other

regional producers.

When the going GETS TOUGHTwo southeastern Oilmen of the Year recount how theyve handled bad times

BY JACQUELINE LOUIE

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Lampman, Carlyle, Alida, Halbrite,Estevan, Regina, Swift Current, Lloydminster & Wainwright

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Even so, he reports, Saskatchewans oil and gas operations are

barely profitable at current prices. You keep pumping oil and try-

ing to make money, he comments. We are still doing business, but

cash flow has been greatly reduced.

While revenue sags, fixed costs havent changed. Fortunately,

Valleyview has always reined in expenses. Remember, this is

Saskatchewanweve got a mentality of trying to be efficient,

Cugnet says. In fact, Valleyview has some wells that its prepared

to drill, given a modestly higher, reasonably consistent price with

some upward-looking movement. Cugnet wont specify what price

could trigger more drilling, but if oil doesnt go up, we might just

continue to fly in a holding pattern.

Not that Valleyviews founder yearns for the return of $147 per

barrel. A price that high doesnt do anybody any good, the oilman

observes. It doesnt do the consumer any good. And our costs went

through the roof, so personally Id like to see a moderate oil price.

If I had to pick a number, it would be somewhere this side of $100

a barrel.

Cugnets 47-year career began with roughnecking at age 16,

briefly on a service rig and then in drilling. Hes also worked in

a supply store and as a landman, moving up to manager of field

operations and joint venture partner. The fourth-generation

Ken Cugnet, president of Valleyview Petroleums, was named a Southeast Saskatchewan Oilman of the Year in 2007.

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Saskatchewan farmer later chaired Tappit Resources Ltd., a public

company that operated out of Regina from 1985 to 2003.

Through a merger, Tappit joined Crescent Point Energy Trust,

where Cugnet continues to sit on the board of directors. Meanwhile,

he and his wife Jo-Anne Bannatyne-Cugnet launched Valleyview

30 years ago. Helping them run the junior producer are four sons

and one daughter-in-law, along with an office manager and a

couple of field operators. The family also operates a cattle ranch.

I think that everybody wants to belong to a team, says the

former rig hand. Young people, in his view, first need a training

ground, then the opportunity to do their job and expand their

horizons. I like the collective intelligence approach: everybody

around the table, regardless of rank, has a say, Cugnet says. I was

the low man on the totem pole at many jobs. I watched how many

people treated the low man and I said, When I get to the top Im not

going to be that way. I have a personal connection to everybody.

How does the head of a close-knit firm react when cash flow

dries up to the point of being more like a dribble? Sometimes

everybody has to hunker down and take a cut, Cugnet acknow-

ledges. In 1997, when crude prices plunged, Tappit even got rid

of the water cooler, he remembers. And we still had to let some

people go. You do what you have to do.

The other Southeast Saskatchewan Oilman of the Year in 2007 was Jim Boettcher, founder of

Three Star Trucking.

>



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There have definitely been some layoffs

on the service side [in the present down-

turn], but not a huge amountthere was

a shortage of workers before. On the con-

struction side, some capital projects have

been cut back or shelved, Cugnet says. As

a producer, good equipment and person-

nel are what keep him loyal to a service

provider in good times and bad. Its fair-

ness both ways, he adds. Its relationships.

They always treated me square, and I try to

be square with them.

Saskatchewan is well positioned to

weather the ongoing economic storm,

Cugnet suggests. We are the last ones to

feel the crunch and we will be first ones to

ride out the other side, he says. For that

reason, I am extremely optimistic about

southeast Saskatchewan. Plus, the govern-

ment in power in Saskatchewan is very

aware of what it takes to keep the econ-

omy rolling.

The Bakken oil play is an economic

crown jewel for both the southeastern region

and the province, he comments. Its a very

sweet, light crudemore compatible to

clean energy, which is the direction people

are going in. Still, the current activity

slump is probably as bad as any of them,

Cugnet says. Its a global situation this

time, which adds some unknowns. This one

is probably going to be longer and deeper

than other downturns, but we will come out

of it. You just know that its going to turn

around.

Three Star Trucking Ltd. is another

family-run firm, based in Alida (a village

85 km east of Estevan). Boettcher, his wife

Mary, and their sons Ken and Tim run 100

trucks that haul crude and salt water in

Saskatchewan, Manitoba, North Dakota,

and Montana. Half of the fleet is company-

owned, half leased. Today, its a bit slower.

Weve got 60 trucks or better out working.

You cut back a bit but you still keep going,

Boettcher says.

Were down probably about a third

[from the same time last year] but we were

too busy then. All of 2008, it was just go

go go. Lots of days, we couldnt even keep

up. Not that many years ago, we were only

operating with 4550 trucks. If we drop 30

per cent, we would be far better off than a

few years ago, says the trucker whose oil

and gas career has spanned half a century.

With approximately 80 workers, includ-

ing several long-time employees, Three Star

has had no layoffs. I dont think Ive ever

laid a key person off, ever. If you let them

go then you may as well close your doors.

They are the ones who keep the business

running, Boettcher advises. One driver PH

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pushing for that, Boettcher says. Many of

Three Stars staff also appreciate it being a

little slower, he notes, because there is a

little more family time. I think slowdowns

are sometimes not all that bad.

Born in Benito, Man., Boettcher was 16

when his family moved to Saskatchewan.

He started in the oilpatch in the winter of

1959, working on a drilling rig. By June,

he had bought a water truck to haul for the

drilling rigs. In 1962, the entrepreneur and

two partners established Three Star. Seven

years later, he and his wife bought out the

other co-owners. The couple also run a

small grain farm with one son.

Like Cugnet, the Boettchers believe

in treating employees with a respect that

extends to good wages, fair treatment, and

listening carefully. Pay attention to employ-

ees and their opinions on how to do things,

the Three Star president counsels. You

cant really just tell them, You do this, you

do that. You ask them, What do you think

of it? They are part of the business as much

as any one of us that owns it, he says.

Good employees are crucial to earn-

ing customer loyalty, Boettcher comments.

You want to give them [the clients] good

service and work with them, he says.

What I try to explain to any new employee

is that when you go out there, the guy youre

working for in a roundabout way signs your

cheque so make sure you do a good job for

them.

Three Star will survive this recession

in good shape, its president predicts, add-

ing that his competitors also appear to

be faring reasonably well so far. As far as

Saskatchewan goes, he says, its crucial

that the provincial government stay the

course on royalty rates and refrain from

tinkering. If we could get to US$60 a bar-

rel oil, we would probably be fairly busy,

Boettcher says. I think you give us another

year or two, things will be pretty well back

to normal.

decided on his own to go home and haul

grain, saying it would give the others a little

more work. And the company has cut back

days for some of its lease operators hauling

out of the United States.

In a slowdown, you get a chance to

breathe a little. Its nice to be able to walk

into the office and not have dispatch holler-

ing at you, Get this, get that. We need more

drivers, we need more trucksalways

The activity slowdown has given hard-pressed oil and gas workers more time for their families.



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Heavy crudeRx

A ttracting oil and gas exploration and production investment in mature petroleum basins can be challenging. In Saskatchewan, that challenge is compounded by a resource base weighted towards heavy hydrocarbons trapped in complex geology. The Petroleum Technology Research Centre (PTRC) is charged with developing the needed

tools and processes to keep oil and gas explorers focused on extracting the provinces

petroleum wealth, and to help market these technologies to other oil and gas producing

regions around the world.

Basically, the whole point of the PTRC is to get at the difficult-to-access oil around the

world, explains Carolyn Preston, executive director of the Regina-based organization.

The Petroleum Technology Research Centre develops ways to recover billions of additional barrels

BY DARRELL STONEHOUSE

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In Saskatchewan, we still have 80 per cent of our heavy oil left in the ground. Our role is to

develop the technologies that access that oil in an environmentally sustainable manner.

We take a more aggressive approach, says Preston, adding that a major goal at PTRC

is preventing production declines that may scare away major producing companies.

Saskatchewan is producing almost as much conventional oil as Alberta, and technology

has increased our production. Weve done it by drilling more well bores and more horizon-

tal wells. But we probably have a finite time before the multinational oil companies leave

because of a decline in production. We need to convert resources to reserves. Right now we

only get eight per cent of our heavy oil resources out of the ground.

The PTRC is a not-for-profit research and development institute founded in 1998

by Natural Resources Canada, Saskatchewan Industry and Resources, Saskatchewan

Research Council, and the University of Regina, with support from the western Canadian

oil and gas industry. It currently operates four major programs targeting enhanced oil

recovery and environmental sustainability. >

Engineer Kelly Knorr is working on the Saskatchewan Research Councils joint implementation of vapour extraction (JIVE) model.


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The research centre has been running

an enhanced oil recovery (EOR) research

program since its inception. In early 2009,

the EOR program became part of the fed-

eral governments Sustainable Technologies

for Energy Production Systems (STEPS)

program and had its funding increased

from $3 million to $10 million.

Preston says the STEPS program will

enable the research centre to work in conjunc-

tion with other scientists across Canada and

internationally to find ways to economically

produce hard-to-access oil resources. The

PTRC executive director hopes to further

leverage the government funding through

partnerships with industry, focusing

research on specific problems. The typical

Saskatchewan situation is a very thin reser-

voir thats deep as well, Preston explains,

and theres lots of bottom water.

The 2008/2009 PTRC enhanced recov-

ery program is focused in five main areas:

recovering heavy oil resources post cold pro-

duction, enhanced waterflooding, solvent

vapour extraction, gas flooding, and improv-

ing the predictability of heavy oil reservoirs.

This pipeline, which transports carbon dioxide from Beulah, North Dakota, is seen here where it reaches the Weyburn project.

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J.C. TRAILERS

Preston points to the Joint Implementation

of Vapour Extraction (JIVE) project as an

example of the kind of work that is being

done at the centre. JIVE is a $40-million

initiative with the goal of developing, dem-

onstrating, and evaluating solvent vapour

extraction (SVX) processes for EOR in heavy

oil reservoirs in western Canada.

Only 5 to 15 per cent of heavy oil

reserves are recovered in the WCSB using

current technologies. This poor recovery

rate, combined with increased production

in recent years, has forecasters predicting

heavy oil production will decline 50 per cent

over the next decade unless new technolo-

gies are applied. SVX technologies, being

developed through JIVE, could potentially

increase recovery rates anywhere from 30

to 50 per cent. In western Canada that trans-

lates into five to ten billion barrels of oil that

otherwise would not be recovered.

The vapor extraction process involves

injecting a mix of methane and either pro-

pane or butane into the top well of a hori-

zontal well pair. The methane is used as a

pressure drive, while the butane or propane

acts as a solvent and reduces the viscosity

of the heavy oil, which then drains into a

lower horizontal well and is extracted.

JIVE research consists of laboratory

studies, physical modelling, and numer-

ical simulations coordinated with three

vapour extraction pilot operations near

Lloydminster. Husky, Nexen, and Canadian

Natural Resources are the operators of

those pilot plants. Preston says the program

is currently monitoring the three pilots and

building 3-D models to try to understand

what is happening in the reservoir under

solvent flooding. So far, the Husky pilot

has been hugely successful, she says.

While the JIVE project currently targets

reservoirs where thermal flooding doesnt

work, it holds significant potential for use

across heavy oil production in the WCSB.

Because no water and heat are used in the

process, greenhouse gas emissions are signifi-

cantly reduced during oil recovery. Compared

to current steam extraction methods, solvent

vapour extraction technology could elimin-

ate approximately 85 million tonnes of car-

bon dioxide from entering the atmosphere.

In addition, 400 million barrels of fresh water

could be saved. And, 1.65 trillion cubic feet

of natural gas would not be burned per bil-

lion barrels of oil produced. JIVE also has the

potential to safely store enormous quantities of

CO2 in the reservoir, as the solvent is recovered

and the casing gas is not vented.

The Weyburn-Midale Carbon Dioxide

Monitoring and Storage Project in southeast

Saskatchewan is also a significant project

for the PTRC. Launched in 2000, the $80-

million project is aimed at measuring and

monitoring carbon dioxide injection and

underground storage as a means to limit

greenhouse gas emissions.

The project is being run in conjunction

with carbon dioxide miscible flood EOR pro-

jects at EnCanas Weyburn field and Apache

Canadas Midale field. Carbon dioxide, along

with water, is injected 1,500 metres deep

into the depleted oilfields. The operating

strategy alternates gas and water injections

to sweep the reservoir. The carbon dioxide

injection increases reservoir pressure and the

fluidity of the oil, releasing it from the rock

pores to flow towards production wells. >



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Using this technology, around 8,000

cubic feet of carbon dioxide are required to

produce a barrel of oil. Most of the injected

carbon dioxide returns to the surface

together with oil and water, where it is then

separated and re-injected. At the end of the

enhanced oil recovery period, virtually all

injected and recycled carbon dioxide will be

permanently stored.

The carbon dioxide comes from the

Dakota Gasification Plant near Beulah,

North Dakota. There, the gas is cap-

tured from coal, liquefied by compres-

sion, and pipelined 320 km north to the

Saskatchewan oilfields. This is the first

man-made source of carbon dioxide being

used for enhanced oil recovery.

Phase one of the project, which ended in

2004, focused on predicting and verifying

the ability of the oil reservoirs to economic-

ally store carbon dioxide. This goal was met

through a comprehensive analysis of the

various process factors as well as monitoring/

modelling methods designed to measure,

monitor, and track the carbon dioxide in the

enhanced oil recovery environment.

The final phase of the project, cur-

rently under way, continues to build the

most scrutinized carbon dioxide geological

storage data set in the world. The program

aims at building a best practices manual for

future carbon dioxide storage projects.

Steve Whittaker, manager of the

Weyburn-Midale project for the PTRC, says

researchers are continuing to gather data at

the two fields. As the years of injection hist-

ories and monitoring information add up,

they are gaining confidence in the viabil-

ity of storing carbon dioxide underground

in the future. Right now the project is

still in the enhanced oil recovery phase,

Whittaker explains. But [so far] it looks

like these types of reservoirs are a good

place to be putting carbon dioxide. It looks

like a viable option.

The project manager adds that while

the PTRC focus is on carbon storage, the

enhanced oil recovery operations using

carbon dioxide have also proven worth-

while. People are raising their eyebrows

at the amount of oil they can get out using

carbon dioxide, he explains. The results

at Weyburn indicate this could be applied in

other reservoirs.

The PTRC is in the midst of launching

another significant carbon storage project

called Aquistore. The goal of this project is

capture flue gas from the Consumers Co-

operative refinery and upgrader in Regina,

separate out the carbon dioxide, and inject it

for storage in underground saline reservoirs.

Were going to capture 500 tonnes

per day and inject it into a deep geological

reservoir holding saline brine, Whittaker

says. Our goal is to do a demonstration

project to show we can inject and store car-

bon dioxide into these kinds of reservoirs.

The schedule tentatively calls for injection

to start in three to four years, followed by

at least three years of collecting data on the

effectiveness of storing carbon dioxide in

briny reservoirs.

This hut in the Weyburn field is painted beige, indicating that its a carbon dioxide injection point.

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Betting ON BITUMEN

Oilsands Quest Inc., the operator of Saskatchewans only major bitu-men project to date, is slowing its capital spending, but it says develop-

ment will continue this year. In 2008,

McDaniel & Associates Consultants Ltd.

estimated that the producers Axe Lake

and Raven Ridge sites in the northwest

region have at least 1.5 billion barrels in

place, and possibly up to three billion.

The two prospects comprise about five

per cent of the companys lands in the

remote area.

Oilsands Quest, a junior with a huge resource, keeps moving ahead

BY MIKE BYFIELD

Paul ODonoghue, VP of corporate

planning for the Calgary-based junior,

reports that a lot of work is proceed-

ing at our three test sites, particularly

test site three. Research at the first

test site focuses on how much bitumen

can be produced using thermal recov-

ery processes based on steam and hot

water. The reservoir program at the

first test site now extends to comple-

tion of several vertical holes and three

750-metre horizontal holes (300

metres length within the reservoir). >

Oilsands Quest South Camp

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Prairie Mud Service

Serving The Saskatchewan Oil Industry

Office: 738-6th St. ESTEVAN, SK

Oil Well Drilling - Mud

Rotary Drilling Bits

Ray Frehlick Res. - (306) 634-2107Cellular - (306) 421-0222

Wayne Hein Res. - (306) 634-0002Cellular - (306) 421-9555

Chuck Haines Office - (403) 237-7323Cellular - (403) 860-4660

Ph: (306) 634-7361 or (306) 634-3411fax (306) 634-6694

Estevan24 Hour Service

Prairie Petro-Chem Ltd.

We Never Mistreat Oil

Office: 738-6th St. ESTEVAN, SK WEYBURN(306) 861-1903

SWIFT CURRENT(306) 741-1604

Oil & Gas Treating Compounds

Ph: (306) 634-7362 or (306) 634-6694fax (306) 634-6694

Estevan24 Hour Service

The second test site will assess recovery

processes based on hot propane and other

gases. We have completed the design for

a solvent recycle facility at test site two,

which remains at the planning stage,

ODonoghue says.

In place of steam or solvents, the

third test site employs electrical heat-

ing methods. Electric heaters have now

been placed downhole in order to study

heat dispersion in the bitumen-bearing

formation. Were generating a large

stream of reservoir-related data, which

will have a big bearing on what happens

at test site one, ODonoghue says. To

preserve capital, however, the company

says it will defer steam injection at its

first test site.

Oilsands Quest is coordinating its in-

house computer simulation studies with

research by experts in reservoir structural

analysis, petro-physical characteristics,

and laboratory scale reservoir production

testing. These studies will provide guid-

ance for future research phases and help

assess alternative options for commercial

development.

Between May 2008 and January 2009,

the junior producer drilled 55 exploration

and delineation test holes at Axe Lake and

Raven Ridge, bringing its Saskatchewan

total to more than 400 holes. During the

period, Oilsands Quest completed an

approximate 40 kilometre 2-D seismic

program, and is now evaluating that data.

Reservoir test wellheads at test site in northwestern Saskatchewan.

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B E T T I N G O N B I T U M E N


The project the world is watching

Today, SaskPower is leading the development of one of the largest integrated clean coal/

carbon capture projects in the world.

Jointly funded by SaskPower, the Government of Saskatchewan, the Government of Canada

and private industry partners, the Boundary Dam Integrated Carbon Capture and Sequestration

Demonstration Project would rebuild and then re-power an aging coal-red power generation

unit at the Boundary Dam Power Station in southeast Saskatchewan.

Engineering the power of tomorrow

By 2015, the new unit would produce more than 100 MW of clean, baseload power while

reducing SaskPowers annual greenhouse gas emissions by about 1 million tonnes. The result

would be near-zero emission electricity for Saskatchewan and liqueed carbon dioxide (CO2)

to extract millions of new barrels of oil from Saskatchewans oilelds through enhanced oil

recovery.

SaskPower is interested in developing partnerships with the Saskatchewan oil industry to

purchase the CO2 from this leading-edge project for use in enhanced oil recovery. Together,

we can balance the needs of our natural environment with those of our business environments.

Interpretation also continues on 1,847 kilo-

metres of 2-D and 3-D seismic data shot in

the 20072008 winter program. Delineation

drilling resumed in late January with three

drilling and coring rigs completing a 20-

well program at Raven Ridge.

Weve entered into an exploration

agreement establishing a formal relation-

ship with the La Loche and certain other

local communities through which the envi-

ronmental, social, and economic aspects

of our exploration activities in north-

west Saskatchewan will be managed,

ODonoghue says.

At the end of January, Oilsands Quest

had cash and short-term investments total-

ling C$50.3 million plus US$10.8 million.

Over the previous nine months, the companys

development program burned cash total-

ling $73.6 million, with no offsetting

income from production at this early stage.

In future, we will need to raise money, and

were examining several alternatives for

managing that situation, ODonoghue says.

In his view, the field results are so promis-

ing that Saskatchewans first oilsands will

come on stream in due course.

A skid-mounted steam generator and coring material at the Oilsands Quest project.

PHO

TOS:

OIL

SAN

DS

QU

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B E T T I N G O N B I T U M E N


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LION

SBL

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LIONSBLDG.

WEYBURNAGRICULTURAL

SOCIETYEXTRA PARKING AREA OUTSIDE GROUNDS

SOCIAL CENTRECURLING RINK

SPORTS ARENA

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OUTSIDE DISPLAY

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SASKPOWERSAFETYDSPLAY

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FLOOR PLAN SCHEDULE OF EVENTS EXHIBITOR LISTINGS

Weyburn Exhibition Grounds13th Biennial June 3 & 4, 2009

Saskatchewan Oil & Gas Show


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13th Biennial Saskatchewan Oil & Gas Show

Documents

Transcript of 13th Biennial Saskatchewan Oil & Gas Show