Pipeline News August 2016

PIPELINE NEWS Saskatchewan’s Petroleum Monthly

August 2016

Canada Post Publication No. 40069240

FREE

Volume 9 Issue 3

Tough times got even tougher:

Oil spill hits North Saskatchewan River, Drilling down substantially

Premier responds to Husky spill A2

Most Sask. rigs were idle in July

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Husky oil spill hits North Saskatchewan River A3

While July has been very slow for most drillers, a few rigs could be found at work. Here Kiley Bouchard, left, Jason Goudy, centre, and Giovanni Wilson, right, of Betts Drilling Rig 3 worked on preparing a new well for cementing on July 22. That well, south of Arcola, is one of five Triland Energy Inc. has planned for this fiscal year. See related stories on Page A10 and Page A13.

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PIPELINE NEWS August 2016

Drinking water is the number one priority: Wall ■ By Brian Zinchuk Regina – Drinking water is the number one priority, according to Premier Brad Wall, who spoke at length on July 27 about the Husky oil spill on the North Saskatchewan River.

That spill became evident the morning of July 21, after monitoring systems detected anomalies the evening before. (See related story Page A3) Wall spoke to reporters at the Legislature in Regina. His intended visit to North Battleford and Prince Albert was put off until later as the administrations of those cities were tied up with dealing directly with the spill.

Wall said he’s been in contact with mayors and a First Nations chief at Cumberland House, asking what resources they need.

“Husky has said they are going to be responsible for the financial costs of all this, and I expect that to be the case,” he said, pointing out that in some cases,

businesses like car washes and laundromats in Prince Albert have had to shut down operations.

He reiterated that his initial response, when the leak was first made public, was “Our concern should be the response.”

“In this case, we need make sure that drinking water is available, that potable water is available to communities.”

He took umbrage to media coverage on July 22, which focused on his follow up comments on pipeline safety and not his statements on drinking water.

“Our number one concern right now is the response. We’ll get into the debate about pipelines versus rail or about how we move oil across this country at a later date. But for now, I think we should just set it aside.”

Asked about ecological damage, he said, “That’s what we’re trying to get a handle on. The first duty of government and Husky and the municipalities is

to respond, to make sure people have potable water.

We have a lot of folks in the RM of P.A. who don’t have water.”

Husky has offered to provide potable water, Wall said, in cooperation with the government and municipalities. “That’s got to be the first, immediate response for all of us, but you bet we’ll need to get a handle on what the ecological impact is on that river.

“Saskatchewan’s waters, our lakes and our rivers, our habit is precious to all of us. There’s an economic element to it, but it’s our environment. It’s our habitat, and Saskatchewan people put a high priority on it. So we need to determine the long term ecological impact to the extent there is one, and the best way to clean it up.”

Government agencies are tapping into “worldwide experience” to deal it. “We’ve got to have complete restoration and rehabilitation in terms of habitat and ecology along

the North Saskatchewan River,” Wall said.

Asked about the speed and effectiveness of Husky’s response, Wall said, “There’s been a spill, and people are without water in Saskatchewan. No, I’m not satisfied. I don’t think anyone should be. I don’t think Husky’s satisfied.

They better not be. We need to find out all of the details around the situation. They’ve indicated they want to find out the details. As you know, they want to find out all the details. We have a pretty rigorous process in place. I want to share with you that in the last budget, we took away duties from those pipeline inspecting so they could focus on inspections.

We have 24 in the field and three in Regina whose focus is just inspections.”

He noted companies like Husky drive the line and use “smart pigs” to monitor pipelines.

Wall thinks Husky’s taking financial responsibility was the right step to take.

“Husky bears the responsibility here financially, in terms of response, they’ve indicated a willingness to take that responsibility and we accept that position,” he said.

Setting aside the 14 hours it took from initial indications there was a problem to shutting down the line, Wall said, “Once the leak was known, their actual physical response to the issue, cooperating with government, cooperating with municipalities, I can’t put my finger on some egregious error or misjudgement that I would say they’ve made, or that officials are telling me they made. Now, we’re going to wait and go through, after the fact, the response from all agencies.”

Wall’s office reached out to the highest levels of Husky management to ensure they, in turn, reached out to mayors.

The Saskatchewan Water Security Agency is unable to give an estimate, through no fault of their own, to give a more ac-

curate estimation of how long interim measures for potable water will be needed, he explained, added that measures taken by some municipalities have a “shelf life,” as reservoirs will empty.

Wall promised those affected will have the support of the province. Due to a number of disasters in recent years, the province has an inventory of water storage bladders and pumps that can be used.

Asked for a message to those affected, Wall responded, “This is not an optimal situation. It’s a terrible situation, caused by a spill. The government will be there, and so will their neighbours. That’s what Saskatchewan is all about.”

NDP Leader Trent Wotherspoon said, “It sickens and saddens me to no end where we had this period of time where this oil continued to spill into the river. It bothers me to no end the actual response that was put up didn’t have adequate backup.”

Most of Saskatchewan’s small drilling contractors' rigs sat out much of July ■ By Brian Zinchuk Yorkton, Carlyle, Estevan – Most of the smaller drilling contractors in southeast Saskatchewan sat out the first three weeks in July, according to information posted by sister publication Rig Locator (riglocator.ca). Depending on the day, only a handful of the small contractors had even one rig working.

As of July 21, Panther Drilling had 1 rig working for Spartan Energy Corp near Carievale.

D2 Drilling was south of Oxbow with its one rig, working for Villanova 4 Oil Corp. Red Dog Drilling had one rig working with Crescent Point just southeast of Carlyle Alliance had one and Betts had one working.

And that’s it. That’s also largely indicative of most of the month. Most of the fleet has

been parked.

On July 21, these companies had zero rigs working, as indicated on Rig Locator: Crusader (3, two in Saskatchewan, one in Alberta), Stampede (3), Advance (3), Lasso (2), one Alberta, one Saskatchewan) and Vortex (3).

Additionally, Alliance had one rig working (of eight). Red Dog had one rig working and three parked, as did Panther. Vortex had been working in early July, but racked on July 7 before firing up again later in the month Betts had one of four working.

Activity was expected to pick up for some contractors. As an example, Vortex, fired up Rig 1 in late July and expected Rig 2 and 3 to be working by mid-August, according to Derrick Big Eagle, president and general manager.

Alliance expected a second rig to be going to work by the

end of July or early August.

A factor has been recent rainfall, with portions of southeast Saskatchewan getting flash floods due to rain.

Don Rae, president and CEO of Yorkton-based Crusader Drilling, spoke to Pipeline News on July 21. In addition to running his own company, he represents Saskatchewan on the board of directors for the Canadian Association of Oilwell Drilling Contractors (CAODC).

“It’s terrible,” he said. “She’s grim.”

Crusader had one rig (of three) working up until spring breakup, but that’s it, and that was at least four months ago.

“We have some work coming up for Rig 1, I’m working on some stuff for Rig 2. Rig 3 is still pie in the sky,” Rae said.

“In my case, I’m not pre-

pared to go lower on my rate. I’m content to have them parked.”

Rae explained, “We had some reserve built up. We buttoned up the hatches, cut our expenses. I rolled my wage right back. (Admin staff ) are work sharing.”

He noted that companies have curtailed drilling in wet conditions. “Nobody’s getting their feet in the mud,” Rae said, adding, “The banks are getting tough for the oil companies to deal with.”

“I don’t think this year’s anything to write home about.”

For other contractors, he said things will depend on their debt load. They also have an issue with larger drilling contractors from Alberta coming into the area with their super single rigs.

Rae said he hates protectionism and is a big capitalist, but may-

be the government should do something about it. What that might be, he doesn’t know.

Will there be mergers in the industry? “I don’t think at this point,” Rae said.

When the industry sees that the corner will be turned on this downturn, there might be some acquisitions. That would allow some companies to go public, or to become attractive as buyout targets themselves to the largest companies.

At the CAODC level, the message it to pressure government to help where it can, including pushing pipelines. “That would help quite a bit,” he said.

“But a carbon tax would hurt us some more.”

To see business pick up, Rae said, “We need US$55 to US$65 a barrel, and for a little while, too.”

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TOP NEWS Husky pipeline spills into North Saskatchewan River ■ By Brian Zinchuk

North Battleford, Prince Albert – A 16 inch pipeline on the Husky gathering system for northwest Saskatchewan leaked on Wednesday, July 20 or Thursday, July 1, spilling approximately 200 to 250 cubic metres (1,258 to 1,572 barrels) of heavy oil and diluent.

The leak was initially reported as having occurred during the morning of Thursday, July 21, but an initial incident report filed by Husky with the Saskatchewan Ministry of Economy on July 26 stated, “On July 20, 2016 at approximately 2000h, a pipeline release was discovered on the south shore of the North Saskatchewan River, upstream of the south isolation valve site on 12-17-051-24-W3M.” On July 28, Husky submitted an amended report stating, "On July 21st at approximately 10 a.m. a pipeline leak was spotted on the south shore of the North Saskatchewan River, upstream of the south isolation valve on 12-17-051-W3. An estimated 200 to 250 m3 of blended crude oil was released. An undetermined amount of the release entered the river. The Husky ERP was initiated."

The line is part of the Husky gathering system which collects heavy oil from facilities north of the North Saskatchewan River. The incident occurred near, but not at, the point where the pipeline crossed the river, south of Paradise Hill. The spill occurred on the south shore of the river, in the river valley, approximately 300 metres from water. While the nature of the pipeline failure has yet to be determined, the oil flowed over land and entered the river near a Husky facility built along its shore.

As noted in the report, the first

evidence of a leak was detected at approximately 8 p.m. on July 20, but the pipeline was shut in with manual valves at 10:30 a.m. the following day. Crews were mobilized early on July 21, and since then, hundreds of contractors have been working on the problem.

Immediate recovery actions by Husky involved building a berm on land to capture as much oil as possible before it reached the water. On Monday, July 25, Husky officials reported that approximately 70 cubic metres of oil and soil had been collected at the source. The following day they reported 145 cubic metres of an oily water mix.

A containment boom deployed at the Payton river ferry site on July 21 proved ineffectual, as the plume of heavy oil and diluent continued past it and downstream. By July 24, a total of five containment booms had been put in place at Highway 21, Paynton Ferry, two at North Battleford and one at Maymont. Despite this, the oil plume reached Prince Albert, approximately 370 kilometres downstream, by the morning of July 25.

The City of North Battleford has two water treatment plants – one that draws water directly from the North Saskatchewan River, and another that draws from groundwater wells immediately adjacent to the river, but onshore. The surface water plant was shut down on July 21, and by July 22, the city ordered that water conservation measures be put into place, including shutting down car washes and laundry mats, as well as lawn watering. By July 25, the city was looking at temporary measures where they would draw water from the Battle River on the south side of Battleford.

Prince Albert, on the other hand,

is primarily reliant on water from the North Saskatchewan River for its water supplies. As a result, on Friday, July 22, it was advising residents to store up water in bottles and to fill bathtubs. Eventually, all car washes, laundromats and water parks were shut down, and essentially all outdoor water usage was banned, with a $1,400 fine for enforcement. On July 25, it declared a local state of emergency and shut down all intake from the North Saskatchewan River. Prince Albert had intended on drawing water from treated water reservoirs and start drawing water from stormwater retention ponds as an interim measure. They expected to have enough water to be able to handle a week’s shutdown of their water intake.

Over the weekend the city began construction of an approximately 30 kilometre surface pipeline, using irrigation equipment, to draw water from the South Saskatchewan River.

The line ran to the east along Highway 302 to a point downstream of Muskoday First Nation. The 10 inch line was characterized as a “hose,” by Saskatchewan Water Agency officials, who noted that these measures would not be useful past freeze up.

Other communities downstream also draw their water from the river.

Laird uses it intermittently to fill their reservoir, and during the spill response, it shut down such withdrawals. Melfort, and approximately 12 other communities that draw water from the Codette Reservoir near Nipawin, shut down its pipeline on July 26. It reverted to its old surface reservoir, not used since 1993.

The provincial government has been holding daily press teleconferences, initially with representation from the Ministries of Environ-

ment and Economy, but eventually including Health, Environment and Climate Change Canada and Husky.

Al Pate, Husky’s vice-president of exploration and production services, said on July 25, “We realize this has been a very challenging time for everybody, with the spill impacting people, the environment and local businesses.

“We’re deeply sorry this has happened. We accept full responsibility for the event and the cleanup, and we will make things right.

“We’re working closely with the communities, First Nations, governments and regulators to respond to the incident.”

On July 25 Husky began cleanup of the first 20 kilometres of shoreline, starting at the spill site.

Referring to the fact that interim above-ground pipelines would freeze in cold weather, Sam Ferris, executive director of environmental and municipal management services at the Saskatchewan Water Security Agency, said on July 25, “It’s not going to be a short-term event.

“We want to be certain that source water is safe and secure before it is reused for treatment for drinking water purposes … We need further time just to assess the existence of any oil or globules of oil that may be suspended in the water column.”

Pate noted Husky would be covering the costs regarding this spill, and said a toll-free phone line was set up at 844-461-7991.

By July 28, 11 birds, five fish and three mammals had been reported as killed by the oil. Other media ran photos of a heron coated in oil.

With the pipeline shut down, Husky has been using trucking to replace its capacity.

An oily sheen could be seen near Battleford on the North Saskatchewan River the afternoon of July 22. Photo by Averil Hall.

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PIPELINE NEWS August 2016

PIPELINE NEWS

EDITORIAL

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A black eye in our backyard One third of one second.

If you compared the volume of water flowing through the North Saskatchewan River north of Maidstone, to the volume of oil spilled from a Husky heavy oil pipeline, the contamination was equal to roughly one third of a second of the river’s flow.

The pipeline leak’s volumes are estimated to be 200 to 250 cubic metre of heavy oil and condensate diluent. That’s 1,258 to 1,572 barrels, enough to fill two rail cars. The river was flowing at approximately 710 cubic metres per second at that point, according to the Saskatchewan Water Security Agency.

Yet its repercussions, as of July 25, were being felt almost 400 kilometres away as the river flows, when Prince Albert had to shut down its water intake for its water treatment plant. The city was scrambling to get an overland pipeline built along the surface of the ground, using irrigation pipe, to draw raw water from the south Saskatchewan River 30 kilometres away.

As of press time, it was unknown what the effects would be further downstream, but Melfort and surrounding communities, which draw water from the Codette Reservoir on the now-combined Saskatchewan River began drawing water from its old reservoir.

All of this took place as river levels in the North Saskatchewan were high and fast due to significant rain in Alberta. That made for turbulent water and debris, both affecting the efficacy of booms placed across the river. By July 24, there were five, from the Paynton ferry crossing to Maymont. Yet despite these booms, oil still reached Prince Albert. We asked gov-

ernment environmental officials how effective they expected booms to be. They wouldn’t say. The answer appears to be self-evident.

As we go to press, the reason for this spill is not yet known. It was a 16-inch pipeline that took heavy oil (diluted with diluent) from the north side of the North Saskatchewan River to the south, towards Lloydminster. The line failure occurred approximately 300 metres south of the river shore, on land, in the river valley. But beyond that, not much has been said about the cause. A thorough investigation could take weeks. Husky was focusing on the response, they noted.

Of all the places in Saskatchewan where a spill could occur, this has got to rank right up near the top as one of the worst. The only other place that would come close in significance is where the Enbridge mainline crosses the South Saskatchewan River near Outlook, not terribly far from where Saskatoon draws its water.

Unlike a spill on land, that can be relatively easily contained, or even on a lake, with still waters, the North Saskatchewan has been moving that oil right across the province. Even though the volume was relatively small, its impact can’t be understated.

There is no question this is a black eye in our backyard. Husky is a reputable producer with a history in Saskatchewan going back approximately eight decades. How they deal with this cleanup will have tremendous repercussions not only for Husky, but Saskatchewan, pipelines, and the entire energy industry.

PIPELINE NEWS August 2016

The drilling community is hardly moving Take a moment to reflect on the plight of the drilling community this summer.

I divine a tremendous amount of industry knowledge from our sister publication Rig Locator (www. riglocator.ca). On July 8, I checked Rig Locator’s listings and they were not good. While the number of active rigs in Saskatchewan picked up from 15, a few days earlier, to 23, on this day, the level of activity was still abysmal. Of all the smaller drilling contractors based in southeast Saskatchewan, D2 had one rig working, and Panther had another (just one of its four rigs). Betts had one of four rigs working, and Alliance had one of eight. There were just four of 17 rigs working between them.

The other small companies all had their entire fleet of rigs parked on that

day. They included Crusader (3), Stampede (3), Red Dog (4), Advance (3), and Vortex (3). If you were counting, the total number of parked rigs between those companies is 16, of which all but one or two are based in Saskatchewan.

That is NOT good.

I’m running out of adjectives. Bad to worse to horrendous have all been used, as has abysmal.

Yes, we’ve seen some rain. But let me point out that on Aug. 22, 2011, we set a record of 122 active drilling rigs in this province – and that was the year of a one-in-500 year flood in the southeast.

While drilling in Western Canada is dominated by a few major players like Ensign, Trinidad, Nabors and Precision, these smaller companies are, in many ways, the soul of our oilpatch. And it’s not like those big players

are busy, either. Nabors, with 54 rigs in Canada, had just four drilling and two moving on July 8. Just 11 of Ensign’s 69 rigs were working, while Trinidad had 12 of its 72 working.

For Precision, 21 of 133 were active.

For each of those parked rigs, there’s a crew of 21 not working (at least for Saskatchewan rigs, which typically run eight hour shifts and, in normal times, have an extra crew in the rotation). Then there’s office staff or senior management, who may be work sharing or, in some cases, laid off. Plus there’s the wellsite supervisor, geologist, directional drillers, measure-while-drilling, water haulers, land spreaders, cementers, toolhands, truckers, rig movers, mudmen, bit salesmen, power tongs, rat hole rigs, lease builders and surveyors.

That’s a lot of people need-

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OPINION FROM THE TOP OF THE PILE

ed is just to drill a well, never mind fracking and completions to put it on production.

On July 11, 2014, there were 64 rigs working in Saskatchewan, on its way to 90 on July 18, 2014.

In other words, nearly all those rigs listed above were turning to the right two years ago.

It’s pretty typical for these contractors to run around four rigs. While I don’t know this for sure, I would guess most are doing okay with three rigs working, and well with four. Two rigs might keep the lights on, but one rig doesn’t do much for staying in the black, especially at the dramatically reduced day rates oil companies now demand. When your entire fleet is parked, that’s no revenue coming in, period. But the banks still wants to be paid, as does the taxman. Mouths still

By Brian Zinchuk need to be fed.

But there’s no revenue, not when your entire fleet is parked.

Until the last week in July, I had not seen one rig show up drilling in Manitoba on Rig Locator since spring breakup began.

Thus, no wonder Trican closed its doors in Brandon. You can’t cement or frac a well that doesn’t get drilled.

I spoke to a man in the trucking business from Regina. Their service personnel were down by twothirds. I thought that their market, being Regina, was much more diversified.

Not so, he explained. Even in Regina, the oil business apparently pays a lot of the bills.

Another man in trucking told me, as most people do these days, “We’re in survival mode.”

His business is tied to the drill bit, too, and his staff is

down to a fraction of what it once was.

A few weeks ago another learned man I consult with regularly recalled how he remembers seeing a tree having grown in the substructure of a parked rig. For some of these units, I wouldn’t doubt history is repeating itself. A few, in particular, I know have hardly moved in 18 months or more.

Some people may erroneously think that now oil has been floating around US$45 a barrel for a while that we’re out of the woods. On the drilling side, that’s absolutely not the case. Even if you are working, your rates have probably been cut to the point where you’re just trying to stay alive.

Survival mode, indeed.

Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@ sasktel.net.

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PIPELINE NEWS August 2016

Sask. update reveals production down a bit, drilling down a lot ■ By Brian Zinchuk Bismarck, N.D. – Saskatchewan has seen a slight decline in production, but a large decline in drilling in 2015. Gary Delaney, Saskatchewan Geological Survey chief geologist, presented the Saskatchewan update for the Williston Basin Petroleum Conference in Bismarck, N.D., on May 24.

“Cumulative oil production in Saskatchewan is roughly six billion barrels.

Oil production peaked in 2014 at 187 million barrels and dropped to 2013 levels in 2015 by about 10 million barrels,” Delaney said.

That corresponds with a peak of 514,000 bpd over 2014, versus 486,000 bpd for both 2013 and 2015.

Saskatchewan’s six major production formations and groups have had mixed results for their production in 2015 versus 2014. The Viking is up by 1 million barrels, from

21 million to 22 million barrels for the year. The Shaunavon formation is up slightly, from 8.2 million to 8.5 million barrels for the year. The Torquay (also known as Three Forks) is up to 4 million barrels from 3.3 million barrels.

On the downside, the declines are much larger than the gains. The Mannville group, Saskatchewan’s heavy oil region, is down five million barrels over the year, from 71 million to 66 million barrels. The Madison group in the southeast is down three million barrels, from 39 million to 36 million barrels. And finally, the Bakken formation is down two million barrels, from 23 million to 21 million barrels for the year.

Drilling rig activity was down substantially.

January and February, typically the busiest drilling times of the year, saw rig counts drop 25 and 51 per cent for the first two months of the year from

Gary Delaney presented the Saskatchewan update at the Williston Basin Petroleum Conference in Bismarck, N.D. Photo by Renae Mitchell Photography 2014 to 2015. Going into 2016, they dropped again 38 and 51 per cent.

Wells drilled dropped almost exactly half, from 3,657 to 1,831. The trend to horizontal wells, as a percentage of all wells drilled, showed a substantial uptick, as there were 2,840 horizontal wells in 2014 (77.7 per cent) to

1608 (87.8 per cent).

Two significant regulatory changes in recent years included the introduction of the oil and gas well levy and implementation of the Integrated Resource Information System (IRIS). The levy, introduced in the 2014 fiscal year, eliminated 10 different licensing fees,

reducing 20,000 transactions per year.

“The driver behind this is that, industry funds currently about 90 per cent the cost of regulatory costs of oversight,” he said.

“What this enables government to do is deliver on a common goal of effective and safe oil and gas sector for one single fee.”

New technology Only 12 per cent of Saskatchewan’s 56 billion barrels of oil in place is currently recoverable.

But technologies, like the two major carbon dioxide floods at Weyburn and Midale, as well as polymer floods, promises to unlock more. The Petroleum Technology Research Centre’s Aquistore project includes development and testing of CO₂ monitoring technologies.

Discussing Saskatchewan’s stable royalty regime, Delaney provided an example of a Bakken well’s drilling incentives.

A typical horizontal

Bakken well would produce approximately 80,000 barrels of oil. The first 37,574 barrels qualifies for a 2.5 per cent royalty rate.

If the well is deeper than 1,700 metres true vertical depth, the first 100,677 barrels of oil (essentially all the production of a typical Saskatchewan Bakken well) would qualify for the 2.5 per cent royalty rate.

The Viking and Shaunavon reservoirs are expected to be the first to recover when the industry turns around, he explained.

After that, the Success, Bakken and Manville would see recovery. The deeper reservoirs, considered more exploratory, include Birdbear, Duperow, Winnipegosis, Red River and Interlake formations, would be the third tier of reservoirs to see a recovery.

Saskatchewan will host the next Williston Basin Petroleum Conference in Regina May 2-4, 2017. It will be the 25th edition of the conference.

CCS summer school checks out BD3, Aquistore Regina, Estevan – The 10th Annual IEAGHG Summer School, hosted by the BHP Billiton SaskPower CCS Knowledge Centre, took place on the University of Regina Campus from July 18 to 22. Built on the success of previous years’ schools held Perth Australia, Decatur Illinois, Austin Texas, Kloser Seeon Germany, and Svalbard Norway, the school has select graduate students from around the world participating in this study program. Through presentations and workshops the students will investigate the science and communications behind critical issues in the fields of carbon management and CCS. PTRC and its in-house experts have

been asked to present on five topics related to the geological storage of CO₂: induced seismicity, public outreach and engagement, enhanced oil recovery, storage monitoring and verification, and migration pathways (storage).

“We are excited that PTRC has been chosen to both present to, and mentor, students attending this prestigious summer school,” noted Ken From, PTRC’s CEO. “This acknowledgement of our expertise across many areas of CO₂ storage research is a testament to Saskatchewan’s reputation as a leader in CCS research.”

The IEAGHG’s Tim Dixon, manager of the technical programme, noted that “IEAGHG has worked

with PTRC experts for many years, for example since 2000 on the IEAGHG WeyburnMidale CO₂ Monitoring and Storage Project, and we follow with interest the international monitoring collaboration on the current Aquistore project, and it is a pleasure to bring PTRC’s expertise into our International CCS Summer School for the benefit of the international students.”

The students visited Aquistore – Canada’s first commercial-scale CO₂ storage project – after a tour of SaskPower’s Boundary Dam Carbon Capture Facility. Students explored the Aquistore site guided by PTRC’s scientists and field experts. To date, over 75,000 tonnes of CO₂ have been stored at

CCS summer school students toured Boundary Dam Power Station, passing through one of the control rooms as seen here. Photo courtesy SaskPower

Aquistore.

The IEAGHG CCS summer school covers a range of policy and social issues that make it a comprehensive and interdisciplinary learning opportunity. The school helps develop future climate and energy leaders and

encourages the sharing of knowledge and experience between leading organizations. The 10th Summer School’s main sponsors include the BHP Billiton SaskPower CCS Knowledge Centre, Westmoreland Coal, Innovation Saskatchewan, Mit-

subishi Hitachi Power Systems, and Kiewit, with in-kind support from the University of Regina. The IEAGHG Summer School series sponsors include the Swiss Federal Office of Energy, and the UK Department of Energy and Climate Change.

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PIPELINE NEWS August 2016

A7

The Gauntlet no more ■ By Brian Zinchuk Williston, N.D. – Perhaps the starkest contrast for Williston, N.D., in 2014 to today, is the extreme decline in traffic on U.S. Route 85, which, in 2014, I was told was referred to by the locals as “The Gauntlet.”

I have seen the boom. This was the bust.

Here’s an excerpt from my 2014 story: This route is a substantial part of the fairway of the Bakken play in North Dakota, with Williston not only being the epicentre, literally and figuratively, but also the service centre in much the way Lloydminster or Estevan are.

However, if you took all the oilfield businesses (and the activity that goes with it) in Lloydminster, Estevan, Weyburn, Carlyle, Carnduff and Swift Current and threw them into one town, I doubt you would equal what is going on around Williston.

Whereas Saskatchewan in 2011 hit an active drilling rig count of 122 rigs, North Dakota has been running around 190 rigs almost continuously for over two years, dropping from a high of over 210.

And unlike Saskatchewan, they don’t really shut down

for spring breakup, either.

So imagine not only the number of rigs, but the support services like lease building, battery construction, flowline pipelines, fracking, everything, concentrated primarily out of Williston, Watford City, Newtown and Stanley.

The vast majority of it is in Williston. Now take a very large chunk of that traffic and put it on one road.

That’s driving The Gauntlet. I’ve never seen anything like it. It was like Deerfoot Trail in Calgary, except over half of the vehicles were semis, many carrying wide loads, and the road is only two lanes.

It was bumper to winch to beavertails to pushbar traffic. Every so often you’d get someone who thought they could fight their way through it, weaving and passing.

This year, going to the Williston Basin Petroleum Conference in Bismarck on May 23 was a totally different experience. Except for some road construction north of Williston and a new “twinned” bridge under construction, it was a leisurely drive where I could use cruise control most of the way.

My last trip was the most white-knuckled

experience of my driving career, and that includes some nasty blizzards.

For my wife, this was the first time she had been down this route. She didn’t seem to understand how crazy it was in 2014, until I showed her the pictures from that year.

From Crosby, N.D., to Dickenson, N.D., we did not see one drilling rig in the field. Not one! Two years ago, there were 190 rigs working in North Dakota. On this day, there were 27 (the lowest it has been since July 2005), and they were all huddled in the very core of the Bakken play, closer to Stanley, N.D. Instead of seeing numerous derricks doting the horizon in all directions, there were just two, both in yards in Williston.

We didn’t see one rig move, saw only one service rig on the road, a few tankers, and next to no crew trucks or frac spreads on the go.

Back in 2014 North Dakota was frantically expanding Route 85, adding two lanes on the outside of the existing road.

This was in contrast to “twinning,” in Saskatchewan, where a whole new

The Gauntlet in 2014: Driving U.S. Route 85 was a scary experience.

The Gauntlet in 2016: A leisurely drive on cruise control and four lanes.

highway is built adjacent to the existing road, with a median in between. The road construction added to the profound chaos which was The Gauntlet.

Indeed, for this trip I set up a GoPro on the dashboard and did a time lapse video from downtown Williston to the badlands south of Watford City. Watching the clip, you would think there were hardly any other vehicles on the road. The last time I drove that road in 2014, I took my life in my hands

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The bypass around the north and west sides of Williston is also now complete, taking an enormous amount of traffic out of the city proper.

It actually seemed like a normal city, if not a small town, instead of a gong show. An intersection on

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What we did see were yards full of equipment everywhere. Frac pumpers, Rotoflex jacks, tankers, crew trucks; you name it, it was parked.

The “man camps” all along the highway had next to no vehicles in them. Campgrounds, once chock full, were less than half full.

They appeared to be the very definition of “standstill.”

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PIPELINE NEWS August 2016

Federal Natural Resources Minister visits BD3 Other oil companies interested in buying CO2 ■By Brian Zinchuk

Federal Minister of Natural Resources Jim Carr, right, and Public Safety Minister Ralph Goodale visited the Boundary Dam 3 Integrated Carbon Capture and Storage Project on July 6. Photo by Brian Zinchuk

aggressively at carbon capture, storage and research.

“As a matter of fact, it was in the communique that was signed by the presidents of the United States and Mexico and the prime minister of Canada just a

week ago. This technology was named, and we know Saskatchewan is a leader in that technology, so we’re here to have a better look and talk to the people behind it,” he said, adding they are looking at its potential for the transition to a

low-carbon economy.

Carr pointed out the International Energy Agency (IEA) has said this technology will be needed to meet aggressive climate change goals. “We know that Saskatchewan, and this project in particular,

this project with a great deal of interest and care.

We have been working at the issues in carbon capture and storage since the mid-1990s.

This is not a new thing.

We’ve been following it very closely and will continue to do so,” he said.

Picking up on the recent endorsement from the leaders of Canada, Mexico and the U.S., Goodale said, “This technology has a role to play. How, exactly, it figures into the national mix of things remains to be seen. This is a very important part of the equation that the government of Canada will be extremely interested in.”

For those who think CCS is a half-measure, Carr said, “My thoughts about those who say, ‘It’s good, but not good enough, so stop doing it’ –ummm, no! What you do is you try to make it better; and that’s exactly Page 9 ▲

Estevan – A few weeks after federal Environment and Climate Change Minister Catherine McKenna came to visit SaskPower’s Boundary Dam 3 Integrated Carbon Capture and Storage Project, it was the turn of federal Minister of Natural Resources Jim Carr on July 6.

Carr was accompanied by Public Safety Minister Ralph Goodale (the political minister for Saskatchewan in the federal Justin Trudeau government), as well as Saskatchewan Minister of the Environment Herb Cox and SaskPower President and CEO Mike Marsh.

After his tour, Carr told reporters, “We’re interested in the technology. This is a moment where technology meets public policy. We’ve just toured this fascinating place. We know that there is a mandate from our leader to look

has the attention of the world.”

Asked about Alberta’s intention to shut down its coal-fired power generation and if carbon capture and storage could be applied there, he said, “I’m sure we don’t have to tell them.

I’m sure they know. And they understand the technology.

“The prime minister and the premiers, right now, have officials looking at ways which we can come up with a pan-Canadian framework. New technologies will be essential to that framework. We announced in our 2016 budget major investments in renewable sources of energy and improved technology,” he said.

Regarding expanding CCS to Boundary Dam Units 4, 5 and 6, Goodale said it was premature to talk about specific investments and measures. “The government of Canada will obviously be following

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Page 8 what they’re doing here.

What we’re encouraging these technologies to focus on is the next generation of advancing. So we are adept enough, nimble enough, we’re smart enough to explore all kinds of technologies at the same time, and that’s what we’re doing.”

Carr noted that 80 per cent of Canadians are covered by one carbon regime or another, but that’s the nature of Canadian federalism. The first ministers would be meeting in the fall to discuss this.

Two weeks later, on July 18, Environment Minister Catherine McKenna announced Canada will have a national price on carbon emissions by the end of this year, according to Bloomberg.

Cox said Premier Brad Wall has stated now is not the right time for a carbon tax. Saskatchewan’s greatest contribution has been its innovation and work in carbon capture and sequestration.

Cox hasn’t had any discussions with his counterpart in Alberta

Mike Marsh, left, president and CEO of SaskPower, says a consortium of oil companies are interested in purchasing available carbon dioxide from the Boundary Dam project.

for maintaining coalfired power generation using CCS. But he said, “We’re embarking on a pretty ambitious renewable program ourselves, with 50 per cent renewable by 2030, which is higher than Alberta is doing.”

He added the cost of the plant is a form of an “implicit carbon tax.”

Marsh said the project has been an expense for SaskPower, but also an opportunity to reduce greenhouse gas emissions, not only in Canada but, around the world.

He noted the IEA has done studies which say that such technolo-

gies will be needed to meet carbon goals by 2050.

“This is early days for carbon capture and storage. As you know, there are only 15 facilities working in the world today. But certainly it’s a beginning. Next year, you’ll see seven or eight more facilities coming onstream. You’re going to see in the next few years, more and more come online around the world.

“We continue to focus our time and attention right now on Boundary Dam 3. Obviously, we want to make sure this unit is operating the best it can operate.

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We want to monitor our operating and maintenance costs.

“We want to make a very informed decision on (Units) 4 and 5. The

drop-dead date for making a decision for carbon capture is the end of December 2019. Right now, we’re targeting the end of 2017, possibly moving into 2018, so we can get the benefit of another full year of production, take advantage of our learnings here and make an informed business decision on the next unit(s), 4 and 5.”

SaskPower is looking at a number of different options. It could be Units 4 and 5 together, Unit 4 and the next unit phased in, or another unit altogether, at Poplar River or Shand, if fleet-wide equivalency agreements can be reached.

A9

Oil companies want CO2 It was recently revealed that Cenovus is not required to take all the carbon dioxide produced by the BD3 project. That CO2 is used in the Cenovus-operated Weyburn Unit for enhanced oil recovery.

“We continue to be in discussions right now with another off-taker, which is actually a consortium of oil companies.

We continue to be optimistic that we will be able to negotiate something in the near term, and hopefully have a second off-taker under contract as soon as possible,” Marsh said.

Saskatchewan Minister of Environment Herb Cox,left, reiterated Premier Brad Wall’s stance that now is not the time for a carbon tax.

A10

PIPELINE NEWS August 2016

Triland Energy continues to drill, even in downturn ■ By Brian Zinchuk Arcola, Calgary – There weren’t a lot of drilling rigs working in southeast Saskatchewan in mid-July, but one that was turning to the right was Betts Drilling Rig 3, punching a hole south of Arcola for Triland Energy Inc. Triland is a familyowned and operated junior producer, based in Calgary. Hugh Borgland is the patriarch, having been involved in the southeast oilpatch since the late 1970s. He used to own and operate Landex Exploration and Landex Petroleum.

His two sons, Brett and Craig, each run an oil company. Brett runs Triland, while Craig runs Highrock Resources. They sold Highrock Energy to Legacy Oil + Gas in recent years.

(The third Borgland sibling, Dr. Stephanie Borgland, runs a neuroscience research lab in Calgary, and is not involved in the oilfield.)

“We are run separately,” Brett Borgland said via telephone on July 22. “I’m the president of Triland. Craig is president of Highrock Resources. Hugh is the chair of Triland and a director of Highrock.

“We started in March of 2008,” Brett said.

All their property is

Triland Energy Inc. was one of the few oil companies drilling in southeast Saskatchewan in mid-July. This is Betts Drilling Rigs working for Triland. Photo by Brian Zinchuk

in southeast Saskatchewan. Much of it is in the Wordsworth area, south of Arcola, but they also have property at Ingoldsby, near Storthoaks, and WeyburnElswick.

Triland started by acquiring a property from a company in receivership. That property was at Fletwood, north of Moose Mountain Provincial Park. “It needed a lot of TLC – one well had a broken pump. We put a new jack on it. It needed a new fibreglass flowline.”

There were two injector wells providing pressure maintenance.

“It was Tilston – with a high water cut.

We were almost washing the rock. It was 98

to 99 per cent water.”

From those humble beginnings, the company peaked at about 800 barrels per day. With the current downturn, they’re down to around 500 barrels per day, 98 per cent oil. Their gas at Wordsworth is tied into the ATCO gas plant at Kisbey.

“We’re pretty conservative. My dad lived through the 80s. We stay away from a lot of debt,” Brett said.

“One year, we budgeted 10 wells, but that was before the crash.

We budgeted five wells for this year.”

Their fiscal year runs from April 1 to March 30. Their drilling peaked at eight wells in the 2013-2014 fiscal year.

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They like to keep their development within their cash flow.

They’ll drill an infill well to keep cash flow up, and then step out a well at another property.

Almost all of Triland’s oil is produced from the Frobisher, Alida and Midale formations. That means inexpensive open hole completions. “We try to keep them simple, drill them straight. Get in, get out,” Brett said.

“We don’t want to run multistage fracking.

We let the bigger guys figure that out. We’re not adverse to technology. We don’t have the risk tolerance. There’s a lot of luck in this business, for sure. But in the end, you have to drill to make oil.”

The July well was the company’s first well for this fiscal year.

They’ve budgeted five wells, with the remainder to be done in the fall and winter, but they can adjust accordingly. With oil at US$45 per barrel, he said, “We’re taking a

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little less risk in drilling our more proven locations to keep cash flow up. We’re optimistic things will turn around.

Maybe this winter, we’ll see $55 to $60.”

He added, “Service costs are coming down, which is good. It’s a bit of a cycle. People have to learn to adapt.”

Brett added that oil at $100 a barrel was not really sustainable, resulting in “too many people, too much equipment and too much debt.”

“It’s all an adjustment period. We made money in the 80s and early 90s at lower prices than there is now.”

Many junior producers have been designed around the build-then-sell model.

Brett said that was the case with Landex and Highrock, having been built around a five year timeline of build, sell, repeat. With Triland, he said, “We decided to go a different route. Highrock would be aggressive, Triland would start

out slow, work within its means, with no nearterm exit point.

“We’re built for the longer term,” he said.

Saskatchewan is a great place for smaller companies, Brett remarked, where you can have sustainable, successful small companies.

Landowners and service companies are easy to deal with.

Asked about looking towards 2017, Brett pointed out there’s a lot of political involvement at play. Will Donald Trump be elected president, for instance? So when it comes to predictions, he said, “Throw a dart at the wall.”

“We’re cautiously optimistic. Demand is catching up with supply.”

The proposed TransCanada Energy East Pipeline, with its associated Cromer Lateral, would give companies, like Triland the ability to expand the markets for its oil to Central and Eastern Canada, as well as potential exports via the port at Saint John, N.B. When asked about the project, Brett said, “It’s critical for energy independence.”

He suggested President Barrack Obama’s blocking of the Keystone XL project had to do with U.S. production’s market share.

“We need to look after ourselves,” he said. “I think (Energy East) is huge. It gives us options in pricing. We won’t have to guess at differentials. To me, it’s a no-brainer, but there are a lot of hoops to jump through to get it approved.”

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A11

One man operation with a lot of hustle: Evolution Operating ■ By Brian Zinchuk Redvers – Evolution Operating Ltd. may be a one-man outfit, but that one man was doing his best to drum up business at the Redvers and District Oil Showcase May 12-13.

Kyle Smyth said, “I do battery operating, service rig consulting and field operating.

So far I’m a one-man show, but I’m looking to expand.”

Smyth hails from Parkman.

“I’ve been working with Questerre Energy,” he said, working in the Antler field along the

Manitoba border. Questerre gained some notoriety a few years ago by being an early player in oil and gas development in Quebec, only to be, essentially, chased out by the Quebec government’s harsh anti-oil and gas policies.

Smyth, 32, has been working in the oilfield for 16 years. Much of his experience has been in maintenance.

“I’ve got a farm, but I rent my land out,” he said.

Evolution Operating has been in business since July 2010.

It’s not that com-

mon to see booths for such small companies, but he said, “I’ve been trying to find more work, put my name out for companies.”

The poor weather on both days of the show was disappointing.

“The weather is what it is,” he said.

“The last year has been steady. Service rig work is still steady.

There’s always something to be worked on,” he added.

Smyth is trying to get into the hotshot business as well, and had a unit on display beside his tent.

Kyle Smyth’s Evolution Operating offers a diverse array of services. Photo by Brian Zinchuk

Is Northern Gateway dead?

■ By Brian Zinchuk Estevan – The end of June has been a tough period for the proposed Enbridge Northern Gateway pipeline project. First the Federal Court of Canada quashed its National Energy Board permit due to a lack of consultation with First Nations by the federal government.

Then the NEB canned Enbridge’s application for an extension for its start date. Work was supposed to begin by the end of this year.

Not long after those two decisions, federal Natural Resources Minister Jim Carr visited the Boundary Dam Integrated Carbon Capture and

Storage Project on July 6. Asked about what’s going on with Northern Gateway, he said, “Well, the Federal Court of Appeal has said the permit doesn’t qualify anymore, because there was insufficient consultation with the Government of Canada.

So the Government of Canada did not meet it’s constitutional obligations to consult meaningfully with indigenous communities, which is exactly why we are, in the context of other pipeline projects, particularly the Trans Mountain Expansion.

So we are taking very seriously not only what the court says, but what the constitution says, and what our moral ob-

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“The project, itself, will have to be assessed in light of the court

decision. We’re looking at the judgement very carefully and will have an announcement sometime in the future.”

Asked if that pipeline is dead, since Prime

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PIPELINE NEWS August 2016

From camp purchaser to Hula Grill cook ■ By Brian Zinchuk Williston, N.D. – You don’t have to go far in Williston, N.D., to find oilfield workers who have been displaced by the bust but are still finding a way to make it.

In downtown Williston is the Hula Grill, a Hawaiian-themed restaurant with unbelievably good ribs. Making those ribs is Stephen Swenson, from Washington state. He came to Williston to work in food services in what American’s call “mancamps.” That work dried up not long after he arrived.

“I’ve been here since August 2014,” he said. “I worked in Alaska in man camps.”

At Williston, he’s worked at two such camps – Black Gold Oilfield Services, with 400 beds, and ATCO’s camp, with 200. He worked at ATCO first.

“I was the warehouse manager in charge of all purchasing for the ATCO camp. ATCO

had one huge contract with Sanjel, but it closed when Sanjel pulled out in 2015,” Swenson said.

At Black Gold, he was alternate chef.

Both ATCO and Sanjel are Canadian companies. Sanjel's fracking business has since gone out of business this past spring.

ATCO closed its Estevan camp as well, prior to closing Williston.

At Black Gold, they were averaging occupancy rates of 90 per cent full in January 2015, with about eight different contracts. “The first wave of major layoffs was March 2015,” Swenson said. By June, their occupancy was down to 30 per cent.

Camps work on a percentage – with roughly one worker for every 10 occupants. So when occupancy declined, so did the camps’ staffing.

“What really hit was our drilling and fracking companies first. Calfrac went from 200 to 100 by March, then down to 36

by July 2015,” he said.

In the boom times, camps could get from $140 to $170 a night for a single room, including meals. Contracts resulted in better deals. Rates dropped with demand.

“We dropped to $80 to $85 a night,” he said.

By the summer of 2015, his camp work ended.

“I wanted to do something away from the oil business. That’s why I started here (at the Hula Grill) in July 2015,” he explained.

The downturn has been evident in the community, as well. “It used to take me 30 minutes to get downtown from the north end. Now, it takes me 10 minutes,” Swenson said.

Rents have dropped 50 to 60 per cent. Swenson’s two-bedroom, 850 square foot townhouse went from $2,250 a month with no extras to $1,100 a month, including water and garbage pickup. That makes a big difference on a wage

Like several of the people Pipeline News has encounted in Williston over the years, Stephen Swenson came from Washington state to make a living in Williston, N.D. He now works as a cook in a local Hawaiian-themed restaurant, the Hula Grill. Photo by Brian Zinchuk

that is no longer at the oilfield pay scale.

“I was making really good money in the man camps. I don’t think anyone really budgeted.

“I think it makes it back to normal. In Walmart, people picked stuff off pallets. Now it’s fully stocked. The lines are dead now. I used to have to wait 45 minutes to an hour to pay for something. Day-to-day life is much better now.”

Crime has gone up, he noted, particularly

petty theft.

Swenson is married, and has three children.

He said their school went from 240 to 170 kids as families left.

“Speaking to locals, most are happier life has slowed down. You see oil workers doing normal jobs. Rig workers who made $100,000 a year are applying for delivery jobs.”

Swenson added, “I got lucky with this job.

If it wasn’t for this job, I would have gone home

(to Washington).

“Everyone has hope oil will go back up. I don’t think it will be a real boom stage.”

Swenson lived in the San Francisco Bay Area for 13 years and lived through the dot com tech boom there, where $100,000 a year couldn’t get you a decent place to live.

In the aftermath of the economic downturn, a place like Williston, with plentiful jobs, was a sanctuary, he explained.

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PIPELINE NEWS August 2016

Slow summer, optimistic for fall: Betts ■ By Brian Zinchuk

Carnduff – Betts Drilling Ltd. of Carnduff had one of its four rigs active for much of July, but their activity level was expected to improve, according to general manager Bob Betts.

“We drilled two wells for Highrock, and a second well for Triland,” he said on July 21.

“We’ve got another rig moving, July 28, for Steppe Resources. It

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“It’s going to be a slow summer,” he said, but added, “The fall is looking optimistic. We’ll possibly have a third rig working. We should know

by September. We hope to have three rigs out by late September if oil prices hold.”

Calls are coming in more frequently now, Betts pointed out. “You sure noticed as the price rose to US$50. It fell off with the decline.”

ultants Floorhand Giovanni Wilson, of Betts Drilling Rig 3, right, assists Nathan Picton of Gilliss Casing Services run the power tongs. Betts Rig 3 has been active this past July, but it was it was the only one of their four rigs at work at the time. Photo by Brian Zinchuk

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PIPELINE NEWS August 2016

Whiting will drill after all ■ By Brian Zinchuk Bismarck, N.D. – Back in February, Whiting Petroleum, one of the largest producers in the North Dakota Bakken/Three Forks play, made headlines by saying it was suspending all fracking this year.

The announcement came about a month after oil had cratered to US$26.55 per barrel on Jan. 20 and had only recovered to $32.15 per barrel by that point.

By the end of May, with oil prices at US$48.62, things had improved enough that Jim Volker, president and CEO of Whiting Petroleum Ltd., was able to tell the Williston Basin Petroleum Conference that his company would indeed be drilling and fracking after all.

Whiting is the largest oil producer in North Dakota, he noted. The company’s total product at the end of the first quarter of 2016 was 146,770 boepd company-wide. According to its 2015 annual report, Whiting’s Williston Basin production totalled 128,585 boepd at the end of the 4th quarter.

“We are going to complete more wells

this year,” said Volker, responding to a statement earlier that day by North Dakota Governor Jack Dalrymple who had asked industry to finish off drilled but uncompleted (DUC) wells.

Touching on what Wall Street thinks of the Bakken, he noted that currently investors are more enamoured with the Midland basin in Texas, but the Bakken and DJ Basin are two of the most profitable basins in the country.

“We’re a big believer in the Bakken, not only in its future, but where we are today,” said Volker, who is a regular speaker at the North Dakota edition of the event. “We put our money where our mouth is here.

“Whiting has over 5,500 drilling locations yet to be developed here.

We are drilling wells that we think are consistently 700,000 to 900,000 barrels of oil equivalent here.”

The company has 445,000 net acres and 99 per cent of that is held by production.

“So yes, we’re optimistic. We’re optimistic about the Bakken, and we’re optimistic about the future of the oil and

Jim Volker’s Whiting Petroleum has locked their in hedges as high as US$68 per barrel in late 2017, indicating optimism for the future. Photo by Renae Mitchell Photography

gas business in the Williston Basin and North Dakota,” Volker said.

The company tries to keep its position in the core area since about 92 per cent of their acreage falls within that category.

“Here’s why we’re optimistic: things we’re doing today, fracturing these wells, the techniques we’re using, multi-stage fracking with entry points typically two to three entry points per stage over a 40-stage frac (gives) roughly 120 entry points on a 10,000-foot lateral.

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hundred thousand barrels of water … good clean clean water, by the way, has driven our pipe curve up here to about 900,000 barrels equivalent per well.”

He equated that to about $27 million in future net revenue for a well that costs under $7 million.

“That’s almost fourto-one on your money, driving these kinds of rates of return,” he said.

“That’s an attractive rate of return, I don’t care what you’re doing.”

Oil was at US$49 per barrel on the day he spoke, and briefly topped US$50 before returning to the mid-US$40s for the following two months. The oil companies are still quite price sensitive, as he noted, “Many of us will watch and make sure the prices are stable in that $50 to $55 range before shift-

ing, putting a lot more rigs back to work.”

He noted at US$45 per barrel, it takes 2.1 years for a well to pay out. But at US$50, it’s 1.7 years, and at US$60, it’s 1.2 years.

“As you approach that US$60 price range … you get your money back in about a year.

That allows you, frankly, to not have to go out and sell more stock, not to have to go out and sell more bonds, but to develop your interests with your own cashflow. That, in my opinion, is where we’ll be cruising.”

“This is all happening because of improvements in technology, improvements in the way we drill and complete.

Not only are we cleaner, we’re more efficient, and we’re doing it for less money.”

Sixty-day average production rates are up

124 per cent, and, in some cases 232 per cent as a result of these improvements, and that’s compared to wells drilled just two years ago.

Their royalties in North Dakota average around 20 per cent.

Whiting is concentrating on paying down debt. They’ve recently retired about half a billion dollars through a stock exchange. They are also hedging for 2016 and 2017, and this year, about half their production is hedged. Their three-way-hedges have an initial floor of US$45 and a ceiling of $68 per barrel in 2017.

“There are people out there willing to guarantee you a $68 price in 2017, because they think the price is going to be higher. That’s a major turnaround from where we were a few months ago,” Volker said.

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Cutting up old rigs when their time has come ■ By Brian Zinchuk Oxbow, Carnduff – Technology keeps changing, and old equipment is eventually retired and cut up for recycling. This applies in every industry, from steam locomotives to ships to cars with carburetors.

But one thing is for sure, this downturn has resulted in several of the large drilling contractors retiring and cutting up large numbers their old rigs for scrap. Two years ago there were over 800 drilling rigs in the Canadian fleet. As of July 21, there were 672 in the Canadian Association of Oilwell Drilling Contractors (CAODC) Registry.

In 2015, Ensign Energy Service Inc. announced it was decommissioning 21 drilling and two service rigs. Trinidad Drilling decommissioned 15 at the end of 2015. In six years, Precision Drilling decommissioned 236 of its legacy rigs.

Rick Mann used to run Ensign Energy Service Inc.’s Oxbow office.

He took a buyout package in August 2015. In January of this year, he was asked to come back

on a term agreement to cut up initially 11 rigs, then finally a total of 13 old rigs in southeast Saskatchewan. He started Jan. 15, and was wrapped by June 30.

He had the assistance of two excavators equipped with large metal sheers instead of buckets, and their operators. Mann had worked with that company before, cutting up six rigs in the downturn of 2009, older rigs that he said would never go back to work. Otherwise, he said, “I did all the work by my lonesome.”

“I’d pull all the engines and drives. I took the pumps back to Oxbow,” he said.

There were 34 engines, some with transmissions, others with generators, and some more with pumps. They were all consolidated at Ensign’s Oxbow yard.

It was a huge pile of equipment – 13 derricks, 13 substructures, 13 drawworks… A few pieces, like mud tanks and combination buildings were retained.

The sheer-equipped excavators made short work of the old rigs.

“They cut up two der-

An excavator with a sheer chopped up this substructure.

Photo courtesy Rick Mann

ricks in a day with one machine!” Mann exclaimed. “Cutting them into three foot pieces, they cut that like paper.

It was a lot of fun.”

Ensign had purchased Big Sky Drilling in 2003, and Big Sky itself had its own history, and leftover iron. “We cut 750 joins of old drill pipe. Plink, plink, plink,” he said, replicating the sound.

“They snipped that, half inch wall, like nothing.

All old, old stuff. It was pitted. They had been sitting in Big Sky’s yard before Ensign bought it.”

“Big Sky rigs were all home-built, with old components, hard to find parts for,” he said.

“The newest was probably 20 years old – all dated equipment.”

Thus, with this demolition, all of Big Sky’s eight rigs are gone now.

“This time I cut up a lot of old Simmons rigs,” he added.

Most of the work took place in Ensign’s yard, just west of Oxbow, but some took place in Fast Trucking Service’s yard, west of Carnduff. Mann noted they cleaned up equipment scattered from a number of rack sites a few years ago, so it was consolidated now.

Technology change All the rig he cut up were in the jackknife configuration – rigs that

are much more complex, and therefore more expensive, to move. Some were doubles, some were triples, but they were all jackknives.

“Everyone wants teledouble or automated super singles,” he said.

“They move super easy, super fast, and super cheap; and to 3,500 metres, they’re very competitive.”

Mann has long been aware of how technology will change the drilling industry. Several years ago he pointed out to Pipeline News how significant the arrival of advanced drilling rigs (ADR) were to the region. Mann noted that currently, Ensign had two ADRs working in the region and a third on the way. Their conventional rigs working for potash mines near Esterhazy were still working, but otherwise, conventional rigs were no longer in demand.

ADRs are a supersingle configuration, with robotic pipe

handling items like hydraulic pipe arms and what’s known as an “iron roughneck.”

“None of the people touch any pipe. The one on the floor lubricates pipe connections. That’s it,” he said.

“The biggest advantage is your incident frequency goes to zero.

Nobody’s got their fingers in there anymore.”

He point out that ADR-type rigs do most of Ensign’s work now, and their safety record had improved tremendously.

“The writing’s on the wall. You want to work for mining companies, Shell, Esso or Chevron, they won’t look at you if you have a bad safety record,” he said.

As for the downturn in the industry, Mann said, “In my opinion, I don’ think this is anywhere near the end.”

In the meantime, he plans on boatin’, fishin’ and huntin.’

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PIPELINE NEWS August 2016