New program breathes life into low production, inactive wells
May 28, 2025, 9:33 am
Ryan Kiedrowski, Local Journalism Initiative Reporter
A program described as “uniquely Saskatchewan” is setting its sights on low producing and inactive oil wells across the province. The provincial government recently launched the Low Productivity and Reactivation Oil Well Program, which will see incremental production and revenue from those forgotten wells.
“Growing Saskatchewan’s oil and gas industry is a priority for our government,” Energy and Resources Minister Colleen Young said. “This new program will encourage companies to make new investments in existing assets and increase oil production in our province. With our abundant resources, competitive regulatory environment, and targeted incentives, Saskatchewan is one of the best places in the world to develop oil and gas projects.”
The LPRP intends to stretch the lifespan of wells that have already been drilled, allowing access to oil deposits that would otherwise have simply been left in the ground.
At the end of the four-year program, a projected 30,000 barrels per day of oil production and a possible $21 million (in addition to royalty revenue for the province) will be the outcome. Production through the LPRP will also contribute to the province’s goal of increasing oil production to 600,000 barrels per day in the Saskatchewan Growth Plan.
“Every little bit we can squeeze out of the ground and incentivize companies to increase our number of barrels per day is wonderful,” Young said. “These incentives help. Production can be costly, and the economics have to work when you’re setting up new rigs or drilling in new areas. So to go back and to be able to use multi-laterals off of existing ones or off of ones nearby that are new drills is probably more economical for some of these companies and particularly on the smaller scale.”
Program all began with a conversation
What exists as the LPRP in its current form began with Deputy Premier Jim Reiter visiting an Alberta oil company with Saskatchewan roots.
“Initially, Minister Jim Reiter ended up coming to Calgary and we had conversations with him,” explained Justin Kaufmann, Chief Development Officer with Saturn Oil and Gas. “We’re one of the larger producers in Saskatchewan now, I think we’re fifth largest in the province, somewhere around there. So he was just reaching out to see about potentially growing industry in the province and he started talking about production increases and if we had any ideas.”
“The truth was, we already had some internal ideas that we were planning on pitching, so it was kind of perfect timing for this conversation. One of those ideas was this low production or inactive well royalty incentive.”
The idea hinged on recent experiences Saturn had returning to some former wells.
“We did a pilot project in 2022 where we re-entered four different wells,” Kaufmann said. “We increased production on those wells from about three barrels a day on average to about 40 barrels a day on average. It was a great program. In total, I think it was close to 150 barrels a day of incremental oil.”
However, a lot of those re-entries had already produced past the first 37,000-barrel royalty incentive and became simply not financially worth pursuing.
“They didn’t have that great of economics behind them, because now you’re on a sliding scale royalty where you’re paying 15 to 20 per cent royalty,” Kaufmann explained. “So we compared that capital development to just a primary development drill, and the return was about half of what would you see on a new drill. We were leaving incremental barrels in the ground, just because of the economics associated with the royalty.
“That was at $75 oil,” he continued. “At $63 oil, those activities essentially are uneconomic based on that relative factor.”
In addition to discussions with the Government of Saskatchewan, Saturn began working with the Explorers and Producers Association Canada to help lobby.
“They actually brought a lot of other producers who thought that this could also provide value to them,” Kaufmann said. “Producers like Cardinal, producers like Whitecap helped generate the finer points of this. So EPAC and other producers, essentially the province, came out with what they thought the incentive would look like, we gave our opinion and between there, we met at what the LPRP ended up look like in the end.”
New solution to an old problem
It was only five years ago that the province launched the Accelerated Site Closure Program that sought to deal with abandoned oil and gas wells around the province. In three years, more than 8,800 inactive wells were capped, 3,400 flowline abandonments were completed, and over 14,000 site remediation/reclamation activities were done. Some 18,500 oil and gas sites saw closure work completed by the spring of 2023.
Now, with the LPRP, not only are inactive sites being revisited and profit potential returning, but Kaufmann pointed out another important aspect.
“Alberta doesn’t have anything like this,” he said. “This is unique to Saskatchewan. I hope they follow suit, because another thing is liabilities that the province has on wells that just aren’t producing. This helps reduce those inactive liabilities, and that’s what the provinces are trying to direct producers to get rid of.”
The LPRP is viewed by some as essentially no-cost to the government.
“When a well produces less than about six barrels a day, the government no longer receives a royalty on it,” Kaufmann said. “That’s on purpose, because if those wells are already struggling to stay active, you throw a royalty on it, next thing you know, the producer’s just got to shut it in, and it’s a liability instead of a well that is still being serviced by the nearby areas to help with jobs, etc. So essentially, this doesn’t cost the province anything, and it’s just all upside for both the producer and the government.”
From the pilot project Saturn did in 2022, Kaufmann estimated the provincial government will receive about $500,000 in royalties.
“And that was only on four specific wells,” he said, adding that the $21 million of additional revenue the government is forecasting “could be potentially on the low end of what they’ll see for additional revenue.”
“We did our first re-entry since 2022 in February because of this program,” Kaufmann said. “It was on our 921 well in the Hastings area. It was a well that hadn’t produced since 2012 and it came online, the first 30 days, over 100 barrels a day. So great start off to our new re-entry program.”
Those results have Kaufmann hopeful for stronger returns as the program goes on.
“Again, it’s going to depend on how much capital we deploy a year,” he said. “We think it has the potential to save us—depending on our program this year—upwards of $300,000 to $400,000 in 2025, and then that will expand year over year.”
Currently, the LPRP runs until March 31, 2029, but Kaufmann believes if the incentive stays longer, there’s more to gain.
“I can see it saving us upwards of a couple of million dollars a year when we have the first few under our belts and can increase the size of our program,” he said.
Big impact in Southeast
As with many oil and gas companies with interests in Saskatchewan, Saturn has a presence throughout the provincial hotspots, but Kaufmann sees the biggest impact for their operations to be in the southeast corner.
“Our conventional wells are a carbonate formation with fairly high permeability,” he said. “So generally, you drill these with open hole completions—you don’t need to frack them, and that’s why this incentive works so well, and the costs are fairly minimal. A new drill is about $1.1 million, a re-drill is around half a million. That’s why this program is working for us on those specific type of wells.”
While there are only a handful of companies in southeast Saskatchewan, Kaufmann thinks the LPRP might be an attractive incentive for new players.
“It would potentially help upstart juniors and bring future entrepreneurs to the space because of the low cap-ex (capital expenditure) requirements,” he said. “When we started as a company in 2017, our first job was on actually a re-complete, because you’re looking for small types of capital activities that require a very minimal cap-ex to bring production along, to bring the cash flow. So I could see this having the potential to add to new entrepreneurs as well.”
Saturn may have a Calgary headquarters, but the leadership team has strong Saskatchewan roots—something that has stuck with folks like Kaufmann.
“It’s nice to be able to grow a company inside the province you grew up in and they’ve been great partners,” he said. “We realize that this is a partnership. No one side is trying to take advantage of the other. That’s worked well for both parties, and we continue to be excited about developing in the province.”
In 2024, oil and gas production in Saskatchewan hit $13.5 billion with the province listed as the second-largest oil producer in Canada, employing over 26,000 people.
