Released on June 26, 1997
Premier Roy Romanow and PanCanadian Petroleum President David Tuerannounced in Weyburn today plans for the development of a $1.1 billion
enhanced oil recovery (EOR) project in the Weyburn Unit southeast of
the city.
The new EOR project is expected to begin operating in late 1999 and is
one of the biggest industrial ventures in Saskatchewan's history. The
Weyburn Unit, the largest oil producing pool in the province with more
than 320 million barrels pumped to the end of 1996, is operated by
PanCanadian on behalf of approximately 35 partners.
Over the forty year life of the project (which extends the life of the
Weyburn field some 25 years), it will create 30,000 person-years of
direct and indirect employment and generate $585 million in resource
royalties and taxes.
The project will use an innovative technique in which carbon dioxide
(CO2) is pumped into the oil-bearing formation thereby forcing more of
the oil out. Over the life of the project, approximately 20 million
tonnes of CO2, which was previously being released into the
atmosphere, will be trapped deep below the earth's surface.
The CO2 will be purchased from the Dakota Gasification project near
Beulah, North Dakota and transported to Weyburn via a new pipeline to
be constructed over the next two years.
There are only three other CO2 projects in Canada, including a pilot
project in the neighbouring Midale Unit, but it is hoped that
this project will stimulate similar projects elsewhere in
Saskatchewan.
Noting the effect that horizontal drilling had in increasing oil
recovery in the past decade, Romanow emphasized the importance of
applying new technologies.
"The opportunities presented by methods that increase recovery
from existing pools are equally important as new discoveries, if
not more so," Romanow said. "It all comes down to sustainable
development, efficient management of our non-renewable resources
and maximizing the benefits the people of Saskatchewan will
derive from them.
"Without this enhanced oil recovery project, the 122 million
barrels of incremental oil that it will produce would have
remained in the ground and none of the additional jobs or wealth
would be generated."
In recognition of the project's employment, spin-off benefits,
resource tax revenues and wealth generation prospects, Romanow
announced:
the seven per cent Education and Health Tax for the CO2 will
be waived;
all remaining "old" oil (in production prior to 1974) in the
Weyburn unit will be reclassified as "new" oil, slightly
lowering the effective royalty rate; and
enhanced oil recovery royalty rates charged prior to the
point at which the project's capital costs are recovered
will be reduced from four per cent to one, after which point
a 20 per cent royalty would be applied to the project's
operating revenues as opposed to 30 per cent as is normally
the case.
However, the government will not inject capital or provide loan
guarantees. "Our terms protect the taxpayers from exposure to
financial risk and I regard these fiscal concessions as an
investment in the people of Saskatchewan," Romanow said.
"We were glad that the government shared our vision of this
project for the future, demonstrating leadership, decisiveness
and responsiveness," PanCanadian President David Tuer said.
"Together, we were able to re-affirm our commitment to develop
Saskatchewan's resources in a win-win scenario."
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For more information, contact:
Marg Moran McQuinn
Energy and Mines
Regina
Phone: (306) 787-2567