History Saskatchewan's first commercial crude oil discovery was made in 1944. Many of the major pools in the province were discovered as a result of an intensive exploration effort in the mid 1950's and early 1960's. Description of Crude Oil Crude oil is a mixture of many substances, mainly compounds of carbon and hydrogen, together with varying portions of sulphur. These complexes were produced through the decomposition of plant and animal remains under heat and pressure over millions of years. Their ultimate origin goes back through photosynthesis to solar energy. Crude oil is also referred to as petroleum, from the Greek word petra, meaning rock and the Latin word oleum meaning oil. Saskatchewan produced crude oil has a wide range of quality, varying from light sweet crude to heavy sour crude. From these, three types of crude oil is produced; heavy, medium and light gravity. All three types are produced in almost equal proportions. Heavy crude is dark, thick, sticky and viscous; similar to blackstrap molasses. This crude is high contents of asphalt and sulphur. Light crude is colored light golden brown and flows fairly easily. Medium crude has characteristics in between those of light and heavy crude. Location Crude oil and natural gas occur in sedimentary basins. The source of hydrocarbons is usually an organic rich shale from which light liquids or gases are released. These substances move upward or laterally. Eventually they are trapped by an impervious layer and accumulate in a reservoir, such as a porous sandstone or limestone. Globally, the greatest production of oil is from the young sedimentary rocks, about 60% from those less than 60 million years old. Much of Canada's oil is produced from rocks much older than this with the host rocks of many of the rich oil fields of Alberta being 350 million years old. Heavy Crude - Lloydminster and Kindersley areas Light Crude - southeast part of province around Weyburn and Estevan; Kindersley area Medium Crude - southeast and southwest Saskatchewan Mining and Refining Crude Oil In Saskatchewan, oil is recovered from underground reserves in several ways: Primary (basic) Method - Oil is simply pumped to the surface. Secondary Method - Waterflooding consists of injecting water down a neighboring well to force out more oil than can be extracted by straight pumping. Tertiary Methods - Enhanced Oil Recovery (EOR) - substances such as steam, gases or chemicals are injected into reservoirs to flush out oil that cannot be produced by either primary or waterflooding techniques. The majority of the province's refining capacity is in Regina where Consumers' Co-operative Refineries Ltd. operates a 50,000 barrel per day conventional refinery. NewGrade Energy Inc., a joint venture by Consumers' Co-op and the Government of Saskatchewan, completed construction of a 55,000 barrel per day heavy oil upgrader in 1988. The Newgrade upgrader is currently operating at full capacity. The upgrader converts the heavy crude into a lighter, higher quality product, which is used as feedstock for the Co-op Refinery. A second heavy oil upgrader was built at Lloydminster, Saskatchewan in 1992. This bi-provincial upgrader is operated by Husky Oil and is sourcing equal amounts of heavy oil from Alberta and Saskatchewan. Current input to the upgrader is 55,000 barrels per day of heavy crude and 6,000 barrels per day of light "tops" from Husky's Lloydminster asphalt plant. Light synthetic crude is produced from the heavy crude. Over 500 people are employed, in total, at the upgraders. Producers of Crude Oil Any company can produce oil in Saskatchewan as long as it obeys the provincial laws and regulations governing its activity. Companies must acquire the petroleum rights from the Province of Saskatchewan or private individuals or companies. Approximately 75 per cent of oil and gas rights in Saskatchewan are held by the province with the remaining 25 per cent of the oil and gas rights being privately owned. There are over 400 oil and gas companies operating in Saskatchewan on behalf of more than 2,100 working interest owners. Saskatchewan had in excess of 21,000 wells listed as capable of oil production at the end of 1995 (approximately 16,000 active wells). There was an increase in drilling recorded in 1995 with at total of 1,778 oil wells drilled compared to the previous year. The oil produced in Saskatchewan is largely dependent upon one main pipeline system (Interprovincial Pipe Line) to transport it to market. Uses for Crude Oil gasoline aviation fuels diesel heating oil residual fuel oil asphalt lubricants Economic Impact for Saskatchewan Crude oil production has increased over the past several years can be attributed to the many advances in technology that have taken place in the oil industry, as well as continued strong development and exploration activity. Saskatchewan is the second largest oil producer in Canada after Alberta. The province produces more than 20 per cent of total Canadian oil production. About 24 per cent of Saskatchewan's production is currently used within the province. Approximately 63 per cent of Saskatchewan's production is exported to the United States. The remainder of Saskatchewan's production is sold in Eastern Canada with a minor amount of heavy oil sold in Alberta. Prices are largely determined by the crude oil market in Chicago. Direct and indirect employment associated with Saskatchewan's oil industry (excluding refining, upgrading, and natural gas activity) now accounts for over 12,000 jobs. Environmental Concerns The Saskatchewan government constantly monitors oil production in the province to make sure producers follow the laws and regulations which exist to protect the environment. The Future: How Much is Left? It is estimated that approximately 80-85 per cent of Saskatchewan's oil potential has already been discovered. Therefore, a large part of the future of our industry is tied to improving recoveries from existing pools. A horizontal drilling technology significantly improves recovery rates and lowers operating costs for many reservoirs in Saskatchewan, particularly those in the heavy oil areas.