Providing coverage of Alaska and northern Canada's oil and gas industry
September 2007

Vol. 12, No. 36 Week of September 09, 2007

Saskatchewan startup rolls along

Gary Park

For Petroleum News

Oilsands Quest shows no signs of wilting its trail-blazing efforts to commercialize Saskatchewan’s oil sands deposits.

It picked up five of six blocks of exploration licenses offered in the Saskatchewan government’s latest land sale, paying C$252 million for 110,000 acres, plus an annual rental of about C$4.30 per acre, and added one oil shale exploratory permit to its holdings.

In addition, the startup company has regulatory approval to drill 97 exploratory wells on its permits in northwestern Saskatchewan, which expire March 31, 2008.

Two rigs are being mobilized to start drilling by mid-September before freeze-up.

The approvals cover 70 holes in the Axe Lake area, where Oilsands Quest has issued a “best preliminary estimate” for its properties of up to 750 million barrels of original bitumen in place.

It is now conducting pre-commercialization studies and running tests to assess the best recovery method.

Until those results are known, the company is not ready to set any timelines for development.

It said eight drilling rigs have been committed to operations over the next eight months, although the winter program will wait for “ideal” conditions.

Errin Kimball, Oilsands Quest’s vice president of exploration, said the program is the next chapter in the development of Axe Lake, increasing the company’s knowledge of the reservoir as potential production capability is assessed.

Oilsands Quest is combining 2-D and 3-D seismic, electrical resistance tomography and drilling to reduce risk and accelerate timelines for exploration and field production testing — a strategy it intends to use for its adjoining permits in Alberta.

Syncrude has cleanup deadline

In other oil sands news:

• Put it down to the less-than-sweet smell of success. Syncrude Canada, the world’s largest source of synthetic crude at 260,000 barrels per day, has been given until Sept. 4 to develop an interim plan for cleaning up noxious odors from its plant in northeastern Alberta.

It will then have an Oct. 1 deadline to provide a detailed plan for long-range cleanup.

The orders have no immediate impact on production.

The smells of ammonia and hydrogen sulfide have generated repeated public complaints over the past 10 months from residents as far as 15 miles away, although no health complaints have surfaced.

The regulator, Alberta Environment, said the emissions seem to be trace amounts of gases emanating from a waste treatment pond where oil is recovered from fluids flowing out of processing units.

Syncrude Production Vice President Marc Theriault said in a statement the consortium will take immediate steps to comply with the order and the deadlines.

The smells have set off Syncrude’s emissions alarm, which warns when levels of hydrogen sulfide reach a certain level.

Air quality measures in the Athabasca oil sands region include 12 monitoring stations.

Mined ore in the oil sands average about 5 percent sulfur content which is removed by upgraders that convert heavy bitumen into synthetic crude for refining into lubricants and fuels.

Theriault said Syncrude will work with Alberta Environment to “ensure accurate readings are taken throughout our facility and that any potential odors are investigated.”

“We believe the Alberta government is encouraging all oil sands operators to better manage odors,” he said.

Western will participate

• Western Oil Sands, a junior partner in Shell Canada’s Athabasca project, remains fully involved in plans to expand the operation while anticipating its takeover by Marathon Oil will be concluded in the final quarter of 2007.

With a 20 percent interest in Athabasca, Western said it will participate in a feasibility study of a second addition to the joint venture.

The study will evaluate a mining, recovery and blending project to produce about 100,000 barrels per day of dry bitumen for blending with lighter hydrocarbon materials to yield a marketable bitumen blend product.

Construction is already under way on a first-phase expansion of Athabasca’s Jackpine Mine, adding 100,000 bpd to the initial output of 155,000 bpd.

• Suncor Energy, Husky Energy and Synenco Energy have teamed up to build a private airstrip to facilitate a fly-in, fly-out service for their remote oil sands camps, taking a large bite out of commuting times by eliminating two-hour drives.

Canadian Natural Resources and Syncrude Canada have already established airports at their sites.

The 6,900-foot strip, due to be operational by the end of 2007, will be able to handle Boeing 737-800 jets. Costs are not being disclosed.

Synenco, which is looking for a partner or an outright buyer, is developing a mine 60 miles north of the oil sands “capital” at Fort McMurray for its 100,000 bpd Northern Lights project.

It currently owns 60 percent of the project, with the balance held by China’s Sinopec, a unit of China Petrochemical Corp.

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