ESTEVAN — Saskatchewan’s oil industry is far from dead, but one longtime industry leader says its future will depend on cutting costs, building pipelines and convincing younger generations the sector still offers opportunity.
The message came during the Estevan Chamber of Commerce’s latest Coffee Talk on May 6, where business and community leaders received an update on the oil and gas sector from a long-time local leader in the field.
Warren Waldegger, who is the president and CEO of Bent Shed Oil and Tsunami Royalty and the chairman of the Saskatchewan Headquartered Oil Producers, told the crowd at the Days Inn's Taylorton Room that the gas industry came to Saskatchewan in 1935 and oil started up about 10 years later. Approximately 466,000 barrels of oil are now produced each day in the province, he said.
During his speech, Waldegger repeatedly stressed that “oil is not dead” despite the message he says has been conveyed by some groups to those in the industry and elsewhere.
“We have to start using our voices and promoting this industry. Especially to the kids, because we’re losing talents. Lots of us are only here for so long," he said.
Waldegger noted the province has a target of 600,000 barrels per day (bpd) of oil, but Waldegger said it’s going to be challenging to get there.
“Our provincial average is less than 10 barrels of oil per well per day, and the average water cut is 93 per cent water cut, so we are an oil-skimming operation in Saskatchewan,” said Waldegger.
Saskatchewan does pretty well at production, he said, but economic barriers and regulation need to be kept to a minimum to keep wells pumping.
“It’s something that I bring up with governments all the time, just to say that you need to pay attention to this, because we are going to wipe out a massive resource for the province if we can’t keep our costs inline,” said Waldegger.
Looking at historical production, Waldegger said he is amazed when he looks back at the 1950s and 1960s at how much oil was found, and left behind, because they didn’t have the infrastructure that exists now.
“We’re still using those old well bores from the 1950s and 1960s to identify plays. They just couldn’t go after them because they couldn’t deal with the water. Now we have a tolerance for it because we have all the infrastructure, all the injectors, facilities, flow lines, etc.,” said Waldegger.
From 2000 to the start of the COVID-19 pandemic, Saskatchewan had pretty stable production, he said, between 500,000 and 600,000 bpd. The pandemic hit and the number slipped to 430,000 bpd. Now it’s around 460,000 bpd, despite technological advances and what he views as pretty reasonable oil prices. He added production has also ramped up in the U.S.
Multi-lateral drilling is happening in southeast Saskatchewan, and about 141,000 barrels per day come from the technique. A few different types of multi-laterals exist, he said, with the pitchfork design being used in the southeast.
“The government has offered some incentive for these wells,” said Waldegger.
As for oil prices, West Texas Intermediate has been over $100 per barrel since the war in Iran broke out in March, but the price has stabilized to $79 per barrel, as of May 8. The war in Iran has had a much bigger impact, he said, than Russia's war on Ukraine that started in February 2022.
Waldegger said that at the start of the Ukraine war, everyone thought Russian oil would come off the market. Waldegger countered he thought one barrel wouldn't come off because China, India and Europe would still get their oil from Russia. But the Iran war is different.
The Iran war has had "the biggest impact to oil production we’ve seen,” he said.
Regionally, Canada and the U.S. are a bit isolated because they’re net exporters, but there can only be so much of a gap with the oil price. If Canada doesn’t get the oil to market, the U.S. will, he said.
“We need pipelines. We are part of the solution to Iran and the Middle East controlling market share. Canada can be a big part of it, but not without pipelines. And we can’t have all of those pipelines going in one direction," he said.
Waldegger predicted good times ahead for the industry. He’s involved with a lot of public companies, and he said they’ve never been stronger, with low debt and share buy-backs, but there isn’t a lot of new money coming into the industry.
“The industry is basically just self-funding itself through cash flow, so it’s a pretty unique time in the history of Canadian energy, where the companies that are operating here are extremely disciplined. There are some growth companies, but a lot of them are just growing five to 10 per cent a year, and taking the rest of the money and giving it back to shareholders in terms of debt repayment, dividends, etc.,” said Waldegger.
The industry has never been on a better footing to be able to ramp up, he said, but now the biggest issue is to find the people to do the work.
