Estimates (20 April 2005)

Departmental Estimates

From Economy Committee Hansard - 20 April 2005

Saskatchewan Research Council
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Mr. Stewart: Thank you, Mr. Chair, and Mr. Minister, for that commercial. And Id like to also welcome the officials, and I look forward to the support that theyll give us today in getting some answers to a few questions. This wont be controversial today as the official opposition is very much in support of the Saskatchewan Research Council and its associated Petroleum Technology Research Centre.

I hope to get finished today, and well still make an effort at that, but we do have a number of questions to ask. Mr. Chair, to the minister: who is currently on the board of directors of SRC?

Hon. Mr. Cline: I do have a list of the board members which I shall locate, actually in my binder. Yes, the board is composed of Mr. Keith Hanson, whos the Chair; hes a business person in Saskatoon. Mr. Mike Monea is the Vice-Chair; he happens also to be the head of the Petroleum Technology Research Centre in Regina. Dr. Schramm, who is also the CEO, serves as secretary of the board.

And then there are seven members: Doug Kelln from SaskEnergy; Larry Cooper of Scientific Instrumentation Inc.; Craig Zawada, who practises law in Saskatoon; John Bennett of Beckman Farms Ltd.; Dr. Amy Veawab of the Faculty of Engineering of the University of Regina; Dr. Peta Bonham-Smith of the Department of Biology at the University of Saskatchewan; and Ms. Patsy Gilchrist of SIAST [Saskatchewan Institute of Applied Science and Technology].

Mr. Stewart: Thank you, Mr. Minister, Mr. Chair. Mr. Minister, could I ask the same question of the Petroleum Technology Research Centre, who the directors and officers are?

Hon. Mr. Cline: Yes, Id be happy to provide that information, Mr. Chair. I dont have the list in front of me for the board members of the Petroleum Technology Research Centre, but what Ill do perhaps is undertake to provide the member with a copy either later this afternoon or shortly. Yes, I can give you the . . . as of 2004 and if its changed Ill get that to the member.

But Frank Proto is the Chair. Allan Cahoon from the University of Regina is the Vice-Chair, or Im sorry, is a member of the board. Then Philip Chan from Talisman Energy; Bryan Cook from CANMET [Canada Centre for Mineral and Energy Technology] energy technology centre of Natural Resources Canada; Carl Henneberg, who is the president of Blacksmith Resources, a Saskatchewan oil company.

Mike Langley, vice-president of business development for North American Oil Sands Corporation; David Long, the general manager of heavy oil and gas business for Husky Energy; Bob Mitchell, a retired vice-president of Talisman Energy Inc. And not to be confused with the former minister in the Saskatchewan government, this is a different Bob Mitchell. Brian McConnell vice-president of exploration for Tundra Oil and Gas Ltd.; Dan OBryne, vice-president of technical services for Nexen Inc; Laurier Schramm, Dr. Schramm here who is also the president of SRC; Larry Spannier, who is deputy minister of our Department of Industry and Resources; and John Zahary, president and CEO of Viking Energy Royalty Trust.

And as I said, if that is changed since 2004, Ill just undertake to get the changes to the member.

Mr. Stewart: Thank you, Mr. Minister, thatll be perfectly satisfactory. Mr. Chair, Mr. Minister, how many employees now work for the SRC, and I presume that PTRC [Petroleum Technology Research Centre] will be separate from this.

Hon. Mr. Cline: Yes, its approximately 260 employees work for the SRC mostly in Saskatoon, but I believe 30-some in Regina.

Mr. Stewart: Thank you, Mr. Minister. And the same question for the Petroleum Technology Research Centre?

Hon. Mr. Cline: They have about three employees. As you can appreciate they partner with other organizations like the University of Regina, so there are people that are working there but they may be from industry or university or elsewhere.

Mr. Stewart: Thank you, Mr. Minister. I understand the arrangement, I think. What amount is the SRC expecting to receive in grant from the provincial government this particular year?

Hon. Mr. Cline: It is $8.16 million.

Mr. Stewart: Thank you. And the same question for the Petroleum Technology Research Centre or is that lumped in with the eight one?

Hon. Mr. Cline: It is a separate amount and well just get the figure for you.

Mr. Stewart: Thank you. Do we know offhand how much revenue that the SRC generates from the private sector?

Hon. Mr. Cline: Yes. Mr. Chair, to the member, these are as of 03-04, the most recent figures available. From industry in Saskatchewan it is approximately $7.6 million and from industry elsewhere in Canada its approximately $5.5 million for a total of, you know, just more than $13 million.

Mr. Stewart: Very good. Thank you, Mr. Minister. As well, how much revenue will the Petroleum Technology Research Centre be generating from the private sector?

Hon. Mr. Cline: Okay, Mr. Chair, Ill get that figure for the member along with the grant allocation to the Petroleum Technology Research Centre. And while that information is being assembled, perhaps we could move on to another question and then Ill return to that.

Mr. Stewart: No problem. Thank you very much, Mr. Minister. Mr. Chair, Mr. Minister, in your introduction, Mr. Minister, you spoke about alternative energy, particularly hydrogen powered vehicles. Im wondering when might the technology in that regard be at the commercial stage and if . . . And I guess there may be two answers to that, one for heavy vehicles and one for light ones. I wonder if there is any insight that we can gain from that.

Hon. Mr. Cline: Well thats a very complex question, and I dont know that anyone has, you know, a clear, concise answer to that. But perhaps I should ask Dr. Schramm, who is a scientist, to comment on that. And as I understand, your question is related to hydrogen and when that might be feasible for use in large and small vehicles?

Mr. Stewart: Right.

Hon. Mr. Cline: On a commercial basis?

Mr. Stewart: Yes.

Hon. Mr. Cline: Okay.

Mr. Schramm: Yes. We dont know for sure when it might be. That will be up to industry and the marketplace to determine, however, it could be relatively soon depending on things that take place in the business environment around us. The vehicles that our organization has been part of developing, that the minister referred to in his opening remarks, are targeted at this transition stage where there is not much hydrogen fuel available presently for vehicles on the road but might be as things evolve in short order, possibly in a few years down the road which have the capability of operating either on a readily available fuel such as gasoline or diesel when that is what is available to a consumer, but to be able to use an advanced fuel such as hydrogen in locations where that is available.

So that is another way of saying that the hydrogen doesnt have to come into the marketplace everywhere all at once to allow for the possibility of consumers operating vehicles that could take some advantage of it as it does become available. There is the possibility of some vehicles being commercially viable within a very short time possibly a matter of even a couple of years in very limited numbers because there is presently the possibility of obtaining hydrogen from by-product streams of current industry that is already operating at facilities such as the upgrader here in Regina and the large chemical plant in Saskatoon.

Now that would be a modest beginning. Our estimates are that there might be enough fuel from sources such as that to economically fuel some few thousand vehicles. Thats a long way from broad acceptance into the marketplace, but thats probably the next step.

So coming back to your question, the number of years to go beyond that, to get truly significant numbers of vehicles on the road at an economic price, we simply dont know. What we are trying to do is provide the technology for business and industry that would like to take steps in that direction to help them grow their businesses and be competitive. And that is the path that makes sense to help them get there as quickly as possible.

Mr. Stewart: Thank you, Mr. Schramm. I recognize that thats not a question that you could answer with a specific number, but I do appreciate the insight.

Mr. Chair, Mr. Minister, with recent royalty incentives that have been announced for enhanced oil recovery, can we estimate what that will mean in additional income to the Petroleum Technology Research Centre, if any, from the private sector?

Hon. Mr. Cline: Mr. Chair, the answer to the member is no, we do not know a figure for that. We cannot estimate what industry may pay to the PTRC.

But Dr. Schramm indicates to me that the response of industry has been very enthusiastic and that there is interest in industry putting money into the PTRC. And were in the process of, you know, negotiating some arrangements with industry. But we just dont have any figures on that, other than we have the strong indication that it will be positive, that money will be flowing into the PTRC from industry. And hopefully next year at this time, we would have a, you know, a clearer indication of how much.

Mr. Stewart: Thank you, Mr. Minister, Mr. Chair. Mr. Minister, I wonder, Mr. Minister, if you could give us some insight as to the type of services that may be provided to particularly the oil and gas sector by the PTRC in the, you know, short-term, immediate future.

Hon. Mr. Cline: Yes. Before I answer that, Mr. Chair, I can now answer a few questions that the member asked earlier that I did not then answer. He asked for the budget of PTRC coming from government. The figures are from . . . The Department of Industry and Resources provides $1.5 million to PTRC for operating and $137,000 for capital, for a total of $1.637 million for this year.

And industry is providing a total of about $1.263 million, the majority of which is for the Weyburn project thats $915,000 and $348,000 for other programming.

And to now move on to the last question. In terms of the services that PTRC is providing to the oil and gas sector, it is somewhat general in this sense that there are a lot of researchers working there who would be looking at sort of any and all ways, or thinking at least about any and all ways to figure out how to get our oil out of the ground.

And as the member knows and I think all members of the committee know, the challenge we have in Saskatchewan in terms of producing oil is largely one of technology because 85 per cent of our oil does not come out of the ground using existing technology. So we have to develop ways to cause that oil to come up the oil well and out of the ground. And so at Weyburn theyre injecting carbon dioxide into the ground, which provides pressure, which then moves the oil and the oil can come to surface.

So one of the things that they are looking at at PTRC of course, is how to enhance CO2 oil recovery. And CO2 oil recovery is already successful at Weyburn, but theyre monitoring it and trying to figure out how to make it even more so.

Then another way is a vapex project theyre working on, and they have kind of a pilot plant for vapex, and that involves another method of injecting, as I understand it, I think its vapour . . . [inaudible interjection] . . . vaporized solvent into the ground to again create pressure which will move the oil and bring it up.

But having said that, when Ive been over at PTRC myself just, you know, looking around and talking to some of the scientists, they will take you through . . . And by the way, they would welcome any of the members of the committee there. Its quite interesting. They will take you through, Mr. Chair, and show you just different things that theyre trying to, in order to move oil.

And Im not trying to be vague at all, but to say that I think the attitude of the scientists is probably that, well we need to have an open mind and try various things to try to figure out how to move the oil. Two of them are CO2 work and vapex work, but I know that there are a variety of other things that they experiment with.

Mr. Stewart: Thank you, Mr. Minister. Any funds that are obtained from the private sector through enhanced oil recovery services, if you like, would they be strictly directed back to the Petroleum Technology Research Centre or would they be distributed across the SRC or might some of them go into general revenues?

Hon. Mr. Cline: The answer, Mr. Chair, is that any money generated from work that would be done by the PTRC, it would never come back to the General Revenue Fund of the government. It would be used for research activities, for research and development. And Its not quite straightforward in the sense that the money would always go to the PTRC, because sometimes they might contract with the SRC or the U of R [University of Regina] to do some of the work, in which case those entities would be paid.

But the general answer . . . and well the specific answer is that the money would always benefit the research organization and further research and development, and it would not come back into general government coffers.

Mr. Stewart: Thank you, Mr. Minister. Mr. Chair, Mr. Minister, referring to the Weyburn CO2 sequestration project, what, if any, has been the extent of CO2 migration in that study? Is it proving to be pretty stable or is it a potential problem?

Hon. Mr. Cline: The indication is that none of the CO2 put into the ground has escaped. Now granted, this project only goes back a small number of years, but the monitoring that they do indicates that the CO2 remains in the ground.

In conversations Ive had with the president of the PTRC, he has told me that the belief that the scientists and researchers have is that that CO2 will be sequestered for thousands of years. Of course we wont be here in thousands of years to see if thats true. But thats the feeling they have, that the geology is such that . . . [inaudible interjection] . . . Yes, I should only speak for myself. The geology is such that they feel it will be long-term sequestration. And in answer to this specific question, is any of it escaping, thus far the answer is no, it is not.

Mr. Stewart: Thank you, Mr. Minister. Some days it feels like weve already been here for thousands of years.

Has there been, Mr. Minister, has there been any CO2 breakthrough into water formations or wells in the area of that sequestration project?

Hon. Mr. Cline: We do not have the answer to that question, and well have to ask EnCana Corporation for further information. And I think what Id like to do, Mr. Chair, is to undertake to ask EnCana that question and provide the member with a response.

Mr. Stewart: Thank you, Mr. Minister. Thats perfectly satisfactory. Mr. Chair, Mr. Minister, for nearly 20 years now CO2 has been sequestered into the Midale oil field. Its been trucked there from Medicine Hat, Alberta. Im wondering if that is part of the study. I mean thats a far more mature project than what has been operating for four years in the Weyburn area.

Hon. Mr. Cline: The answer is that no, the Midale project has not been part of the study because the study is a baseline study where they make measurements prior to the injection of CO2 and then afterwards so that they can monitor the effect. And of course theyre not able to do that with the Midale because its been going on since before they existed, so they cant do a baseline study. And this study that they are doing will be one that will give them complete information on what is happening with the CO2 injection.

Mr. Stewart: Thank you, Mr. Minister. I am no scientist but even I can understand that that might be an issue.

Mr. Minister, or Mr. Chair, Mr. Minister, so far are the results of the study showing that this may be a viable option for permanent sequestration of CO2?

Hon. Mr. Cline: Yes, yes. The answer to that is definitely yes, because they see no leakage. And as I said earlier, the indications that I get from Mr. Monea and other people Ive talked to up there is that they feel, you know, based on their expertise and Im no scientist either that the CO2 will be in the ground long term. They talk about it being down there for, you know, thousands of years. And I cant give you the technical reasons why they feel that way but I know that its based upon their scientific assessment.

Mr. Stewart: Thank you, Mr. Minister. Mr. Chair, Mr. Minister, in the PTRCs report on the CO2 sequestration it discusses the possibility of sequestering CO2 in saline aquifers. Does the PTRC have any plans to pursue a study or to pursue sequestration in aquifers?

Hon. Mr. Cline: The answer is no. They do not have lands to do that and they also have not made any decision to do that.

Mr. Stewart: Thank you, Mr. Minister. Mr. Chair, Mr. Minister, after that short four-year study, and I know that theres probably few conclusions can really be reached, but are there other areas in the province of Saskatchewan where the PTRC is looking at the potential of CO2 sequestration to enhance oil recovery?

Hon. Mr. Cline: The answer, Mr. Chair, is yes. Certainly the PTRC would definitely be interested in considering working on CO2 projects in other parts of the province. Having said that, it would really involve partnership between PTRC and industry. As you know there is EnCana involved, there is Apache involved, and there may be other oil companies involved.

And essentially what you need is for an oil company to come along and say that they want to do some enhanced oil recovery using CO2, at which point they could contract with PTRC to get whatever services they wanted from PTRC. And our objective is that this would become more widespread across the province. And so part of the recent announcement on enhanced oil recovery that the Premier and I made at the PTRC a number of weeks ago was to say to industry that, if you want to do this we will give you some special tax treatment to recognize the expense of doing that. And so the taxation circumstance or arrangement, I guess, is there for this to happen. And now we need, you know, industry to step forward and bring about more projects, in which case we will certainly be pursuing that.

Another side issue to this which is very relevant in terms of the question of whether we have increased CO2 projects around the province has to do with the federal government. And we discussed this partly in question period yesterday in the legislature, the federal governments commitment under the Kyoto accord. Because as one of the opposition members pointed out yesterday, the federal government has said that they want to enter into agreements with the provinces to find ways to reduce greenhouse gas emissions. And if we had more CO2 projects, that would have the effect of reducing greenhouse gas emission.

So were in the process right now, and have been for some time, of trying to convince the federal government that what they should do is to provide some of their funds to Saskatchewan. Not necessarily the government, but it could be the industry or it could be the PTRC or the SRC, Im not sure, because those arrangements havent been made. But my point being that we would like them to meet part of their Kyoto commitment by working with the oil industry and the Saskatchewan Research Council and the PTRC to bring about more CO2 injection projects. And Im told by Mr. Monea at the PTRC that we could quite conceivably meet one-third or more of Canadas Kyoto commitment by doing this without a huge expenditure of funds.

And so were . . . Dr. Schramm was telling me this morning that, you know, we certainly have a plan that is already being executed to try to convince the federal government that this is the way we should go. And that actually included a visit by the Prime Minister, Mr. Martin, to the PTRC recently where this possibility was discussed with him, and he certainly invited us to continue to dialogue with the federal government to bring this about. And its very early days because the federal governments outline for Kyoto just came out, I think it was last week or the week before.

And so to answer the members question, yes we want CO2 injection to go elsewhere and we not only have a plan to encourage industry to do that but we also have plans to convince the federal government to come in on it too. And its a very, very high priority of our government and the SRC and the PTRC to strike this kind of arrangement with the federal government. We think its a real winner for Saskatchewan people, for industry, and for the environment.

Mr. Stewart: Thank you. Thank you, Mr. Minister. Mr. Chair, Mr. Minister, Im going to ask just one more question. Im going to turn the floor over to the member from Biggar. And Im hoping that . . . and then I think the member from Kelvington-Wadena has a few questions and Im hoping that we can finish up and let the officials off the hook and that they wont have to come back. So Im going to cut a little short here and just go to one more question.

Im wondering, Im looking at some copy here regarding the JIVE program which is joint implementation of vapour extraction, the vapour program that you talked about. I see that the Saskatchewan Research Council, Alberta Research Council, and Nexen are involved. Does Saskatchewan Research Council and particularly the PTRC actually experience competition from similar agencies in the field or is it . . . does Alberta get involved by invitation or whats the deal?

Hon. Mr. Cline: The answer to the question, Mr. Chair, is there are some areas where the Saskatchewan Research Council would be in competition with the Alberta Research Council to obtain work for a client. In this particular area, they are co-operating and collaborating. So theyre working together, which I think implies, you know, theyre both trying to perfect the methodology, and theyre sharing information and working together on that project. . . .

Mr. Stewart: Thank you, Mr. Chair. I dont know that well vote this off today, but I believe were finished asking questions. And Id like to thank the officials for their help. Its been very good. Thank you.

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