Oil and Gas Industry
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.
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. 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.
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. 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.
For additional information, see the entry "Oil and Gas Industry" in the Encyclopedia of Saskatchewan.