Well-drilling incentive could open up more extraction potential in southeast Sask.
Multi-lateral drilling allows for more of an oil reservoir to be access from a single well
The provincial government is looking to incentivize multi-lateral drilling in Saskatchewan with a new program.
Multi-lateral drilling allows for more of an oil reservoir to be access from a single well. The province says the incentive program could lead to 200 more wells drilled in Saskatchewan each year.
"The intention is to encourage investment in this new type of drilling. We've seen some uptake in Saskatchewan, but not to the extent that we would hope and certainly not to the extent that we've seen in Alberta," said Eric Warren, executive director of energy policy for Saskatchewan's Ministry of Energy and Resources.
"The goal of the program is really to create a competitive royalty environment for the drilling of these wells and try to see some of that capital deployed here in Saskatchewan, and ultimately to increase oil production toward the province's growth plan target of 600,000 barrels per day."
The incentive was introduced as part of the 2024-25 Saskatchewan budget. Qualifying wells will have their Crown royalty rate capped at 2.5 per cent for a set volume of production, then revert back to the standard.
"The intent there again is to just improve the economics, improve the attractiveness of making these kinds of investments relative to how the royalty regime treats these wells in Alberta," Warren said.
"It is a response to the higher capital cost of this type of drilling."
What are multi-lateral wells?
To visualize what's happening under the ground with multi-lateral wells, Warren used pitchforks and fish bones as examples.
"There's two types of multilateral wells that we're talking about," he said.
"One is sort of a pitchfork style, where you have a number of laterals extending off of the the wellbore. Any number of configurations up to eight legs, and even more. The second is a fish-bone type multilateral, where they're extending a whole bunch of smaller radiating legs off of the main bore in a horizontal fashion."
The program is applicable to new multilateral wells drilled from April 1, 2024 to April, 2028. Qualifying wells are set against the criteria in place before approval.
"The new incentive program for multi-lateral drilling opens up significant new drilling investment opportunities," said Jon McKenzie, Cenovus Energy CEO.
"It aligns with our focus to strategically build our integrated position in the Lloydminster region and we anticipate it will have positive impacts for provincial employment as well as new production growth."
Opening up more potential
Warren said multi-lateral drilling techniques will open up more potential in the Saskatchewan portion of the Bakken formation, located in the southeast and south-central parts of the province, and also the more challenging Frobisher and Midale formations, also in the southeast.
"We expect to see this deployed all across the oil producing regions in the province," he said. "Thinking about the southeast in particular, in the Bakken, it's really about extending the boundaries of the Bakken in terms of the ability to produce some of that oil economically. Now with this multilateral type of drilling, you're able to exploit some of those reserves."
Historically, the Bakken has seen fracking operations halt due to encountering water-bearing formations.
"This technology allows you to go in and exploit some of those places as well," Warren said. "Certainly, we'll see some incremental production there."
Warren also noted that multi-lateral technology will make it viable to extract from some Frobisher and Midale formation reserves that would otherwise be too difficult.
"We've done some projections internally around the number of multilateral wells that we're expecting to see drilled over the life of the program, ranging from 100 to 200 per year," Warren said, noting that the province is hopeful to surpass those numbers.
"With a spike in production naturally comes more jobs," Lisa Baiton, the president and CEO of the Canadian Association of Petroleum Producers, said.
"A more competitive royalty framework will help unlock valuable oil resources in Saskatchewan and will, in turn, create more jobs and additional revenues for the government and municipalities."
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