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A new provincial program will target inactive and low use oil wells to generate incremental oil production and revenue for Saskatchewan.
The Low Productivity and Reactivation Oil Well Program will encourage companies to invest in existing wells through a reduced royalty rate. The program will last four years.
Energy Minister Colleen Young said a few companies — like Saturn Oil and Gas — have expressed interest in the program.
“There are inactive wells and old wells around this province, lots of them,” she said. “It just depends on the economics for those companies as to whether or not they want to reactivate them.”
About 25,000 wells are eligible for the program, Young said.
She said the royalty rate will be reduced by 2.5 per cent between 3,000 m3 and 6,000 m3 and will be adjusted to regular oil royalties after it surpasses that amount.
In the final year of the program, the incentive is expected to add 30,000 barrels per day of oil production and bring in $21 million of additional royalty revenue for the province.
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“It means more revenues for the province, but it also means more revenues and opportunity for jobs and growth in those industries in our province as well,” Young said.
John Jeffrey, CEO of Saturn Oil and Gas, said his company was one that approached the provincial government about creating the incentive.
“What we were trying to do here was we wanted to create a win win for the oil industry and the province,” he said.
“By taking otherwise liabilities, which were inactive wells, by putting money into it and by turning them back on, it creates additional revenue for the province in terms of royalties.”
Jeffrey said this is the opportunity for small businesses to go to the province’s Orphan Well Fund, and take wells out.
“That takes a burden off industry and taxpayers to have to clean those up,” he said. “We don’t see any downside. There’s no cost to the province and it’s all incremental to the energy industry and the province.”
Jeffrey’s company took on a well for a 40-day period, which he said produced double what he hoped for at 100 barrels.
“We’re incentivized to go back and re-complete that well,” he said. “Again, it’s better for landowners, better for the province, and better for us.”
This program will act as a stepping stone in Saskatchewan’s Growth Plan to increase oil production to 600,000 barrels a day, hiking production by 25 per cent.
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