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No, production has not dropped by half

Regina – A Leader Post story on Sept.

Regina– A Leader Post story on Sept. 4 talking about how the slump in oil prices has affected southeast Saskatchewan included the following statement: “Some pumps are still working, but locals estimate production in the oilfields has dropped by half, maybe more.”

The reality is not even close.

Pipeline Newsspoke to Ed Dancsok, assistant deputy minister within the Ministry of the Economy on Sept. 9. He set the numbers straight.

First off, Saskatchewan saw a peak of oil production in December 2014, when monthly oil production averaged 536,000 barrels per day.

Monthly production numbers, to the end of June, saw the average monthly production in June down to 466,000 barrels per day for the province.

“It’s dropped, from just over 500,000, but it certainly hasn’t dropped by half.

“We peaked in December 2014 at 536,000 barrels per day for the month of December, the average over the month.”

On an annual basis, he noted, “What we’re forecasting for this year is about an eight per cent drop in overall production.”

In 2014, production started at 506,000 bpd, dropped below that in July, and then climbed until December back up to 536,000 bpd. Total production in 2014 was 188 million barrels. This year, cumulative for 2015, they are predicting 173 million barrels.

These forecasts are revised quarterly.

Rig count

As for the active rig count, which is down roughly 75 per cent for September compared to recent years and was sitting around 18 at the time of the interview, Dancsok said, “Yeah, it has dropped out quite a bit. Now, we’ve seen it in the past too.

“The other thing, and I’m not trying to find excuses or dig deep for excuse, but we have seen a seasonal variation in Saskatchewan, being that most of the rigs and wells are in the south, cultivated part of the province. There is a bit of respect for our farming community. Look back in the past and we do see a bit of a slowdown around harvest time in rig activity, historically. I’m attributing a bit of that to that kind of historical, statistical variation that I do see. Normally we see the rig count start steepening after harvest, and then post-harvest to freeze up, we see the rigs pick up again.”

(Ed. note: the rig count grew to 35 province-wide by Sept. 28)

He noted that last year was a record year, and one should be careful comparing downturn years to record years.

“Across Canada, the rig count is down. On the Daily Oil Bulletin today, the rig count was down to 24 per cent.

‘I think the last time we saw a downturn like this, it was worse. If you look at the number of oil wells drilled in Saskatchewan, this year compared to 2009, when that was the last downturn, we’re up 50 per cent from 2009. To the end of August in 2009 there were 810 oil wells drilled in province. This year there’s 1220. I think that’s a positive note. The activity level, as far as new wells drilled, is better than the last downturn. Certainly its still down 45 per cent from last year, which was a record year. It’s 38 per cent down from the five-year average.

“It is what it is, a downturn.”

Another thing to consider is in 2009, 50 per cent of Saskatchewan oil wells were horizontal. Now it is 75 per cent, or more, he pointed out. This year it’s actually 77 per cent. “There could be a factor, because there’s more horizontal wells drilled than vertical wells, industry doesn’t have to drill as many wells to get the same production out of the ground.”

If we went to 100 per cent horizontal wells, he suggested we could see a downturn in the number of wells, even in a good year.

Asked if the government has a role in helping out the energy industry like other sectors, such as agriculture, have seen when they have had tough times, Dancsok said, “Saskatchewan has positioned itself with the most attractive royalty regime. We’ve got a great business climate. We’ve got good things as far as the resource out there. I think we’ve done everything we can to make Saskatchewan the most attractive, regardless of the price. No one has brought up anything around further measures to make that work even better, at this time, to us.”

Dancsok has been working in the energy department of government since 1982, so he’s seen downturns before. Saskatchewan has a more diversified economy, which should help use weather the storm, he noted.

“The worst downturn is the one you’re living in at the time,” he said.

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