Edam – It was good news for an economic sector that has seen its fair share of bad news as of late.
March 1 marked the official commencement of steam operations at Husky Energy’s Edam East heavy oil thermal project.
It is one of three new thermal projects expected to commence operations this year. According to company officials, Edam East will produce 10,000 barrels per day; along with Edam West and the Vawn project which are still to be completed, about 24,500 bpd are expected by the end of 2016.
The 10,000 bpd Vawn development and the 4,500 bpd Edam West project are set to begin production in the third quarter of 2016.
Among political officials on hand to welcome the project was Premier Brad Wall. For Wall, it was one of the last events he attended as premier before the start of the spring election campaign.
His remarks at the grand opening seemed less directed to those in attendance and more towards political officials far from Saskatchewan.
“Make no mistake, this sector creates economic opportunity and job creation, new jobs, sustained jobs direct and indirect, and it also supports transfer payments so that all of Canada benefits from the work that you do,” said Wall.
“It’s important that all of us right across the country in politics remember that’s what you’re contributing to.”
The premier’s remarks seemed targeted particularly at political officials in Quebec, who had made some news of their own.
Earlier in the day came word the Quebec government was seeking an injunction against the Energy East pipeline, to make sure it was meeting environmental requirements.
In his scrum with reporters, Wall made known his unhappiness with this latest turn of events.
“We seem to be forgetting what’s best about Canada,” Wall said. “As Canadians we’ve always come together to help sectors when there’s trouble.”
He pointed to the assistance provided to the auto sector and the aerospace sector, and also agriculture when it was in difficulty.
“That’s missing, it seems with respect to energy of late,” said Wall.
“On one hand we have the province of Quebec, that’s going to place an injunction on a pipeline that will replace the need for us to import as much foreign oil, on a pipeline that will take oil off the rail, which frankly is a less desirable, less safe way to ship oil than by pipeline, and a project that will create thousands of jobs. Here’s a shovel ready project that doesn’t take any federal dollars at all, the Energy East pipeline. And we have Quebec opposing it.”
Wall also aimed his remarks at the Justin Trudeau government over the possible imposition of a national carbon tax, which he has also opposed.
“We also have the federal government talking about a national carbon tax at a most inopportune time, at a time when I would say the economy can afford it the least.”
When asked to comment on what Quebec Environment Minister David Heurtel had said, that this was not pitting East and West, Wall disagreed.
“It does. It just does. You know, maybe that’s not their intent, and I’m not arguing with their intent in all of this, but it’s going to cause some problems.”
The premier also pointed out a number of times there was a rigorous process already in place to approve pipelines, through the National Energy Board.
“Should you have official standing or seek to approve or not approve or have a de facto veto on a pipeline, when it is the national regulator’s job to either decide in favour or against these projects? No, the provinces shouldn’t have that kind of standing.”
Wall later hinted a further response may be coming from the province.
“I’ve asked our trade minister and our trade officials to look at what options we have and say ‘you know, enough is enough.’ Saskatchewan and Western Canada also has to protect its own interests and send some strong messages if that is what the province of Quebec is doing. I don’t have any more details on that but I have asked officials to report back on what options we have on a trade perspective.”
Still, the Husky Energy grand opening in Edam did provide an antidote to the political doom and gloom, at least for one day.
Particularly welcome was the job creation in the region. The Edam East project created 30 permanent operating jobs and another 250 construction jobs, and similar numbers are projected for the other two projects in the region, as well.
These particular heavy oil thermal plants were preferred by Husky because, as vice-president Edward Connolly told the audience, they “stand in the front line in terms of capital efficiency.” The plant is sized to fit the deposits in the area, and those plants are standardized for builds elsewhere.
Husky also touted the plants’ low operating costs and fast build times of about 30 months, which included the regulatory approval times.
Husky CEO Asim Ghosh said the projects would “position Husky to be profitable at some US$40 WTI (West Texas Intermediate).”
“Projects like this are an important part of the transformation because they actually give you a nice return at $40 WTI, and they’re a very important part of positioning Husky because 40 per cent of our volume will come from projects such as these, which, on an ongoing basis, will require very little capital to keep the production flat,” said Ghosh.
“So that’s a very important part of how we are using these projects to reposition the company overall.”
Ghosh also acknowledged the current struggles of the oil industry and the job losses.
“These are very difficult times,” said Ghosh, who said his company was “very, very sympathetic” to laid off workers.
“We as a company try our best to be respectful of them and treat their travails respectfully. I don’t trivialize the difficulty that the industry is going through, and we’re all pulling up our belts.”
Since 2010, Husky has invested $8 billion in its Saskatchewan operations, including more than $3 billion building heavy oil thermal plants in northwest Saskatchewan. By the end of 2016, the company will operate 10 plants producing 80,000 bopd. That number exceeds the maximum production of the Bakken play in southeast Saskatchewan, which peaked around 71,000 bopd in December 2012.