While lacking the marquee value of the Bakken, the Lower Shaunavon formation in the southwest corner of Saskatchewan has picked up momentum over the years and started to throw out a challenge to its rival on the eastern side of the Williston basin.
The industry has poked and prodded around the play for more than 50 years with only minimal results until the same horizontal drilling and fracturing technologies that unlocked other tight formations in North America opened the door to an opportunity that is expected to help keep Saskatchewan busy for years.
And operators continue to keep a close eye on what is happening in the Bakken and Lower Shaunavon as that same success to formations across Alberta.
“What works here also works there,” said a spokesman for Saskatchewan’s Energy and Resources Ministry.
The two plays helped push the province over an average 432,000 barrels per day of oil production last year, only 9,000 bpd behind Saskatchewan’s previous record set in 2008 and a match for Alberta’s conventional output.
They also drove land sales in 2011, accounting for two-thirds of revenues.
In the process, they have enabled Saskatchewan to contribute about 14 percent of Canada’s total crude production from 28,000 wells and generate C$12.8 billion in oil and gas sales in 2011.
Mostly locked up
Don Rawson, managing director, institutional research with AltaCorp Capital, said Saskatchewan’s Bakken play has already been locked up, although some prospects remain in the southeast where producers are testing Bakken concepts. He said the Lower Shaunavon play “would be similar, although in some cases improvements in technology cause producers to reinterpret the perceived play boundaries over time.”
The trend contains reservoirs at depths of about 4,400 feet with net pays ranging from 13 feet to 52 feet and containing 22 degree API crude at a much lower permeability than the northern Upper Shaunavon.
Initially, production from Lower Shaunavon wells peak at about 60 bpd, but that has changed as new technologies have been applied, reaching 1,000 bpd by mid-2006 and growing over recent years.
Ed Dancsok, assistant deputy minister in the province’s Ministry of Energy and Resources, was one of the first to openly pinpoint the chances of success in the Lower Shaunavon. “It’s been known for decades that this formation contains large oil in place numbers over a wide area, but the techniques to extract it just weren’t there. It’s much like the Bakken in that sense,” he said.
Now the industry has figured out how to get higher production rates out of the play, which Dancsok said is a “massive crystal and limestone in which the oil is recognized as being there, but because it’s tight and has low porosity and permeability, it has been difficult to extract.”
Initially the top drillers were little-known names and many of them have been swallowed whole as they started to post success.
Now the attention is on players such as Penn West Energy, Crescent Point Energy and, more recently, Cenovus Energy and Husky Energy.
But the transition from an innovative play dominated by daring juniors to one of the focal points of Western Canada hasn’t all been peace and harmony.
Privately owned Wave Energy, which drilled the first successful horizontal well in the Lower Shaunavon six years ago and used its fist-mover advantage to build the largest contiguous land base in the area, built its success by analyzing results achieved through horizontal drilling and multi-stage fracturing in the Barnett shale of Texas. Don Rae, the president and chief executive officer at the time, became convinced that the technology could work in the tight oil reservoirs of the formation and his hunch paid off.
The new-age methods paid off in short order, boosting average output to 150-200 bpd from the 5-10 bpd extracted through vertical wells — a shift that boosted returns from the expensive horizontals and enabled Wave to drill 43 wells in 2008 and raised its volumes to 4,200 bpd.
It didn’t take highly acquisitive Crescent Point to pounce on Wave, with a C$665 million acquisition three years ago, a deal that has left a sour taste with Wave investors, who are suing Wave’s former board members, alleging they did not get full value from the takeover.
In court documents, the former shareholders allege that just before Crescent Point completed the takeover, Wave’s directors improperly sold or transferred “significant assets” to a new company, Coral Hill Energy. They are now claiming C$450 million in damages plus legal costs, although Crescent Point is not named in the lawsuit.
Coral Hill executives have dismissed the lawsuit as “complete baseless and without merit.”
In 2009, Crescent Point also acquired two other private companies — Wild River Resources and Gibraltar Exploration — both of whom were Lower Shaunavon pioneers.
Neil Roszell, president of Wild River at the time of its takeover, said his company was drawn to the play because of its large resource potential and the Saskatchewan government’s favorable royalty and regulatory regime.
He said the key was the magnitude of the resource that “notionally” is 8 million to 12 million barrels a section of oil in place with recovery factors in the low 5-6 percent range and 15 percent-plus under potential waterflood.
“It just looked like a long-term play that, if we could be involved, would prove up millions and millions of barrels for our company,” he said.
In its latest corporate presentations, Crescent Point has identified the Lower and Upper Shaunavon as a low-risk development drilling and waterflood prospect, with a drilling inventory of 2,000 net wells and a possible reserves upside of 269 million barrels of oil equivalent. It plans to drill 91 net wells this year and to further develop a waterflood pilot program, confident that waterflooding can increase ultimate primary recovery factors from 19 percent to more than 30 percent — an objective that will see Crescent Point convert 40 net producing wells into water injection wells in the Bakken and Shaunavon this year.
“This is part of our overall strategy to increase recovery factors on our resource plays with more than 11 billion barrels of original oil in place,” the company said.
The arrival of Cenovus and Husky in the region is stirring even greater interest.
Husky drilled 24 horizontal wells and two vertical pilot wells into its oil resource plays in the first quarter, including three horizontals in the Lower Shaunavon, as part of its repositioning in Western Canada to oil and liquids-rich plays.
Oil sands major Cenovus spent C$690 million in the first quarter on conventional oil properties across Alberta and Saskatchewan, including the Lower Shaunavon and Bakken, and is anticipating these properties will reach 65,000-75,000 bpd by 2016.
Lower Shaunavon output averaged 2,000 bpd in 2011, double 2010 production, and entered 2012 with 73 horizontal wells and one vertical well producing.
Source: Petroleum News (Gary Park)
- Category: Oil Field News
- Written by Discover Weyburn