Saskatchewan has no intention of revamping its oil and gas royalty regime, which is expected to bring in $1.4 billion in revenues this year, Energy and Resources Minister Bill Boyd told the Williston Basin Petroleum Conference here Tuesday.

But Boyd conceded the province might have to "tweak'' its royalty structure to help out the struggling natural gas sector, which has seen historic lows in drilling, prices and production in recent years.

"It's a tremendous success story that's unfolding here in Saskatchewan, particularly in the oil sector,'' Boyd told the conference, which attracted about 1,500 delegates mainly from Canada and the U.S.

"Gas, as you know, is a little more troubled in terms of pricing, but certainly when you look at the oil industry, things are going very, very well here in Saskatchewan,'' Boyd added.

"Our job as a government is to just try and make sure that it continues.''

Boyd said statistics bear out the good news - on the oil side, at least. In 2010, sales from oil and gas totalled $10.5 billion, up from $9.6 billion in 2009.

Saskatchewan saw 2,730 oil wells drilled last year and should see a 10-per-cent increase to 3,000 wells in 2011. Of those, 1,531 were high-volume horizontal wells, which are expected to increase by 18 per cent to 1,800 in 2011.

Capital investment by the industry topped $3.8 billion in 2010 and is expected to increase 13 per cent to $4.3 billion, Boyd said.

Oil production was estimated at 150.8 million barrels in 2010; this year, production is expected to be 159.4 million barrels, an increase of six per cent.

Boyd noted that most of the increase was from the Bakken play, the deep oil resource play that has been driving exploration and development in the southeast for most of this decade.

"That just gives you some indication of the kind of activity we're seeing in Saskatchewan and, of course, most of it coming out of the Bakken play, part of the Williston Basin.''

Boyd said exploration and production activity in the Bakken formation has risen sharply, from 750 barrels a day from 100 wells in 2004 to 60,000 barrels per day from 2,400 wells today.

But the Bakken isn't the only play in Saskatchewan these days, thanks largely to the horizontal drilling and hydraulic fracturing techiques developed to tap the shale-oil formation.

"Now we're seeing that technology being applied in other areas across Saskatchewan province, down in the Lower Shaunavon, the Birdbear, in the Kindersley to Lloydminster areas of the province,'' Boyd said, referring to heavy oil plays in the southwest and south-central parts of the province.

Following his address to the conference delegates, Boyd admitted the natural gas industry was not sharing in the prosperity being enjoyed by the oil side of the industry.

In fact, Saskatchewan is on the verge of becoming a net gas importer due to low natural gas prices and the resulting lack of drilling activity, according to the SaskEnergy 2010 annual report. Less than 100 gas wells were drilled last year in the province.

"After over 20 years as a net exporter of natural gas, Saskatchewan is on the cusp of becoming a net importer,'' the report said.

Natural gas production has declined in all areas of the province, except for the southeast where associated gas is being produced from Bakken oil wells.

At the same time, shale-gas finds in North America have increased gas reserves to the highest levels in 40 years, driving down the price of gas to the lowest in a decade.

"The fundamentals in terms of the natural gas industry have changed and we may need to look at additional steps to encourage further development here in Saskatchewan,'' Boyd told reporters.

"That's an area that we're prepared to look at.''

Source: Yahoo News

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