Saskatchewan aims for 31% increase in crude production to 600,000 b/d by 2030

Canada's Saskatchewan is targeting a 31% gain in crude oil production to some 600,000 b/d by 2030 as part of its annual incremental growth plans, a provincial government official said June 21.

"We want to increase our production and are in a growth plan," Energy and Resources Minister Jim Reiter told S&P Global Commodity Insights in an interview from Regina. "We have little ways to go yet and are looking at increasing production incrementally from now until 2030."

The Western Canadian province, which is home to the giant Bakken tight oil formation and also in part of the Western Canadian Sedimentary Basin, has been receiving its fair share of investments with producers developing new enhanced oil recovery technologies like water flooding and multistage fracking of wells and substructures.

"SAGD and EOR will help increase our output while maintaining a lower carbon footprint," Reiter said. "Oil is going to be needed for many, many years, and we would like to help with that."

SAGD is the steam-assisted gravity drainage technology that is used extensively by heavy oil producers -- particularly those in Saskatchewan and neighboring Alberta -- to extract the resources by steam injection at high pressure.

Saskatchewan's oil production had crossed the 500,000-b/d mark in 2020. But that changed dramatically with the pandemic, he said.

"Just like any other producing area, we were hit hard by COVID, with demand, production and pricing going way down," he said. "We were producing 502,000 b/d in March 2020, and by May we were down to 361,000 b/d."

The province has since been slowly recovering, with production averaging 444,000 b/d in 2021, rising to 454,000 b/d in 2022 and estimated to reach 462,000 b/d in the current year, according to data supplied by Saskatchewan's Department of Energy and Resources.

Oil output in 2024 and 2025 is forecast to be 475,000 b/d and 494,000 b/d, respectively, the data showed.

Saskatchewan's natural gas output is estimated to be 366,000 Mcf/d in 2023, decreasing to 355,000 Mcf/d next year and 345,000 Mcf/d in 2025, the data showed.

No reason was immediately available from the department for the projected decline.

Investments, land tenures

As the second-largest crude oil producer in Canada, Saskatchewan sees itself playing a role in meeting demand coming from both provincial and US refineries and maintaining its competitiveness in attracting investments, Reiter said.

The two other major producers are: Alberta at 3.491 million b/d, from April 2023 as the latest data from the province's Department of Energy, and Newfoundland and Labrador at 217,675 b/d in April 2023, according to information on the Canada-Newfoundland and Labrador Offshore Petroleum Board website.

In 2023, the province is expecting an oil and gas capital expenditure of C$3.4 billion ($2.6 billion) and rising to C$4 billion next year, he said, noting this is compared with C$2.8 billion and C$2 billion in 2022 and 2021, respectively, post-pandemic.

Saskatchewan's sale of crown oil and natural gas lands is attracting interest with 88 "acceptable" bids being received for the 100 parcels on offer in the latest round of bidding early June, according to information on the provincial government website.

The auction resulted in successful bids totaling C$9.4 million for parcels in the Estevan, Kindersley and Lloydminster areas for a total of 19,094 hectares, it said.

"We have a competitive system in place that forges investment, and so far in 2023, it [land sales] has generated C$23.6 million with an average of C$490/ha," Reiter said.

More market access, TMX

Nearly 65% to 70% of Saskatchewan's light, medium and heavy crude barrels flows to the US Midwest and the Gulf Coast primarily through Enbridge's Mainline. But it has to compete for incremental capacity on that pipeline system with crude from the adjacent WCSB in the northwest and the Bakken Basin in North Dakota to the south, he said.

"With the province's projected production growth, Saskatchewan is seeking additional market access," Reiter said. "We are optimistic with TMX being completed and potentially some changes in the Enbridge Mainline, there will be more egress."

The Trans Mountain Expansion -- due for startup in Q1 2024 -- will provide WCSB producers an option to ship additional 590,000 b/d to Canada's Pacific Coast, freeing up capacity on the Mainline, which moves light and heavy barrels from Alberta to the US Midwest.

Spot Bakken crude at the Williston Basin was last assessed by Platts at an 85 cents/b premium to WTI June 20. This was up from a 10 cents/b discount May 25 but down from a $2.45/b premium at the end of February.

North Dakota crude production has risen to 1.133 million b/d in April from under 1 million b/d in December, according to the state's Department of Mineral Resources.

Analysts at S&P Global Commodity Insights expected that Bakken crude output would steadily increase in the months ahead and was forecast to reach about 1.23 million b/d by end 2023 and 1.3 million b/d by the end of 2024.