Canadian Mining Journal

Feature

Sweet Success

Gary St. Onge is a retired schoolteacher and the Mayor of Estevan, a small city located in the southeast corner of Saskatchewan, less than 20 kilometres from the U.S. border.



Gary St. Onge is a retired schoolteacher and the Mayor of Estevan, a small city located in the southeast corner of Saskatchewan, less than 20 kilometres from the U.S. border.

For most of his years there, Estevan has been a quiet, slow-growth city of about 10,000 people, with an economy built on grain, coal and two, nearby coal-fired power plants.

These days, it is one of the hottest places in the country – economically-speaking.

Housing is in short supply, and prices are rising. Every hotel room is booked solid for months in advance. Hundreds of jobs go unfilled each week because there are no candidates to fill them and in recent years, the city has welcomed some 500 Filipinos on temporary work permits to alleviate the acute shortages of labour.

It’s booming, and it’s all thanks to oil; not grain or coal as mentioned earlier.

“If you go 20 miles north or northeast of Estevan you can see the rigs and the new pumpjacks,” says St. Onge. “You turn 360 degrees and you start counting them.”

The pumpjacks are drawing oil and the rigs are looking for it in the Bakken formation, a massive geological structure that spans some 520,000 km2 and encompasses southeastern Saskatchewan, most of North Dakota, a good chunk of eastern Montana and dips into South Dakota.

The formation is essentially saucer shaped – deep in the centre and generally shallower at the edges. The U.S. Geological Survey estimates that there may be as much as 3.65 billion barrels of oil and 1.85 trillion cubic feet of natural gas locked in the Bakken, and that’s only the American portion. About 25 per cent of the formation lies on the Canadian side of the border.

It is believed to extend as far north as Regina, some 200 kilometres from the 49th parallel, but that is largely conjecture at this point.

“The outer extremities continue to be widened,” says Bill Boyd, Minister of Energy and Natural Resources, Saskatchewan.

“The companies tend to drill the outside of the formation first. They’ll drill the interior once they’ve established where the outer boundaries are.”

Oil of the “sweet,” light variety – the best kind, according to geologists – was discovered in the formation in the early 1950s from a well drilled on the property of a North Dakota farm family named Bakken, hence the name. But until very recently, it was extremely difficult to extract at economical prices. The host rocks, two layers of black shale found above and beneath a layer of dolomite, are tighter and much less porous than the limestone of conventional oil deposits.

“By 1956, we had production in southeastern Saskatchewan from the Bakken,” says Ed Danscok, Assistant Deputy Minister for Petroleum and Natural Gas, Energy Department.

“It developed into three or four small pools with a few spotty wells here and there stretching along the border for about 180 miles.”

Rising prices and improved technologies, namely horizontal drilling and hydraulic fracturing, have changed all that. Previously, oil companies sank vertical wells into the Bakken. They drilled as far as 1 1/2 kilometres beneath the surface and drew what they could from the immediate vicinity of the bottom of the well.

Now, they probe just as far down, but then they can drill out horizontally from the well and through the dolomite for as much as 1.5 kilometres. They rely on multi-stage hydraulic fracturing (fracking) to stimulate production.

Technically, fracking (as it’s becoming more and more known thanks to headlines across the country in recent months) involves injecting liquids – such as water, oil, gas or jellified propane laced with tiny grains of sand – into a well at extremely high pressure.

The effect of the liquids hitting the brittle host rocks is similar to a pebble hitting a windshield at high speed. They cause the rock to shatter for hundreds of metres in all directions. The liquids are then extracted from the well, leaving behind the grains of sands, which are known as proppants, and these keep the fractures open and allow the oil to flow into the well.

Price and technology have caused the oil industry in southeastern Saskatchewan to take off like a rocket. There was one well drilled in the region in 2003 and 371 last year. There were 136 producing wells in October 2004 and 3,023 in December 2011. Output has risen from 945 barrels per day in 2004 to just under 70,000 in November 2011. South of the border, meanwhile, the North Dakota Petroleum Council reports that output in the State is currently running at about 550,000 barrels per day, up from 240,000 in 2010.

But rising production has caused the same problem in both jurisdictions – a lack of pipeline capacity to ship the oil to market.

In many cases, oil companies are hauling the product by truck from the wellhead to tankers cars that are moving it south or east by rail.

Saskatchewan has seen good times come and go since the days of the homesteaders and the free quarter-sections, but nobody thinks this boom will run out of steam any time soon.

“The Bakken is a very, very large play and we expect it will continue to grow,” says Boyd. “It’s creating a tremendous amount of investment, business activity and a lot of jobs.”

Indeed, Mayor St. Onge says the Estevan Yellow Pages now contains 16 pages of listings for oilfield service companies, and many have erected new buildings on the edge of the city to house their operations. Three new hotels opened last year and three more are under construction. Small farming villages and hamlets throughout the southeast are also bursting at the seams.

“I used to go to regional meetings and they were crying the blues because their towns were dying and the schools were closing,” says St. Onge. “All the little communities around here are full. Now they don’t have enough building lots.”


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