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The Government of Saskatchewan has launched the Low Productivity and Reactivation Oil Well Program (LPRP), a four-year incentive designed to encourage companies to bring dormant oil wells back into production. The program will apply province-wide, but early indicators suggest the southeast could be a key focus. Saturn Oil and Gas, the first company to participate in the program, has already been looking at reactivating wells in the region.
“I think the bulk of our inventory would be southeast Saskatchewan, Weyburn, Carlyle, Estevan, that area,” said Saturn Oil and Gas CEO John Jeffrey during the press conference Monday. “We wanted to create a win-win for the oil industry and the province.”
The pilot project for Saturn Oil, according to Jeffrey, has been in service for 40 days and is now producing more than 100 barrels a day, which was twice what they were hoping to achieve.
The LPRP provides a temporary royalty rate of 2.5 percent on incremental production from eligible wells, those producing less than 10.5 barrels per day, when companies drill new horizontal legs into existing wellbores. There is a limit of two new legs per wellbore. After a set volume of production, normal royalty rates resume.
Jeffrey explained the economic and environmental value of the program.
“By taking on otherwise liabilities, which were inactive wells, by putting money into it and turning them back on, it creates additional revenue for the province in terms of royalties,” he said. “It also creates more jobs for the province, more royalties, and that, in our opinion, is the best win-win scenario.”
According to Minister of Energy and Resources Colleen Young, the program was developed in consultation with industry, including Saturn Oil, which identified the opportunity to re-enter existing wells as a more cost-effective and environmentally sustainable alternative to drilling new ones.
Young said the goal is to see 30,000 barrels of incremental production per day by the end of the program’s four-year span. That increase is expected to translate into $21 million in additional royalty revenue, which the province says will help fund healthcare, education, and municipal revenue sharing.
“It means more revenues for the province, but it also means more revenues and opportunity for jobs and growth in those industries in our province as well,” Young stated.
The program also supports the province’s long-term energy goals, including reaching 600,000 barrels per day of production by 2030. At the same time, it helps reduce the number of inactive wells and associated environmental liabilities, something industry and government alike see as a priority.
Jeffrey added that reactivation avoids the need for entirely new well infrastructure and often uses local service crews instead of bringing in rigs from Alberta.
“If you’re looking at re-completing an existing well, your vertical pipe and everything that’s in the ground, your surface leases, that’s already built,” he noted. “So you save all those funds... and that takes a burden off industry and taxpayers to have to clean those up.”
As of the launch, over 500 expressions of interest have been received from companies evaluating whether reactivation makes economic sense for their operations.