Cenovus lists oil sands, heavy oil, conventional progress

By OGJ editors

Cenovus Energy Inc., Calgary, has provided updates on its Foster Creek, Christina Lake, Pelican Lake, Telephone Lake, and Narrows Lake oil sands and heavy oil projects in western Canada.

The company hiked spending in the quarter ended June 30 to $660 million (Can.) as it also continued development of its conventional oil assets in Alberta and Saskatchewan. The quarterly outlay was up 39% year to year.

Foster Creek and Christina Lake averaged a combined 160,000 b/d gross, 38% higher than the second quarter of 2011. Christina Lake averaged more than 57,000 b/d and achieved a new daily gross production high of 64,000 b/d, 10% higher than its current gross capacity of 58,000 b/d.

Cenovus began injecting steam at phase D in the quarter and anticipates first production there in the third quarter, some 3 months ahead of schedule. When fully commissioned, phase D is expected to bring the gross production capacity at Christina Lake to 98,000 b/d.

Foster Creek output was up 3% to nearly 104,000 b/d gross in the quarter, which included a scheduled turnaround. The plant produced more than 126,000 b/d gross on several days in the quarter, exceeding its 120,000 b/d capacity. Five phases are producing and three more are under construction.

Cenovus began public consultation for a further phase that is planned to produce 50,000 b/d gross. In total, the company plans to have nine phases at Foster Creek eventually producing 295,000 b/d gross and expects that, with optimization, the total gross production capacity at Foster Creek will be as much as 310,000 b/d.

The company said it is seeing production increases at its Pelican Lake heavy oil operation due to the infill drilling program to expand the polymer flood. Production averaged more than 22,000 b/d in the quarter, 15% above the same period in 2011 when Slave Lake wild fires reduced production by 2,100 b/d.

The production increase continues to be partially offset by reduced operating pressures and shut-ins that are temporarily required to complete infill drilling between existing wells. Cenovus plans to drill 1,200-1,300 producing and injection wells in the next 5-7 years to expand the polymer flood, with production eventually to reach 55,000 b/d.

Cenovus ended its process to identify a potential partner for its Telephone Lake oil sands project and looks forward to developing the asset on its own. No financial need existed to take a partner. Goal of the process was to identify an arrangement that would provide strategic benefit to Cenovus and advance the value of the project, which is not included in the company’s 10-year plan.

Drilling results indicate that Telephone Lake is a world-class resource and has the potential to be a cornerstone project like Foster Creek or Christina Lake, Cenovus said.

Cenovus continues the Telephone Lake dewatering pilot, which is designed to test the efficiency of removing the nonpotable water overlying the bitumen in the reservoir (OGJ Online, Apr. 9, 2012). Removing this water is expected to reduce the steam to oil ratio and operating costs for the commercial project. The company commissioned pilot facilities in the quarter and expects to start water production and air injection in the next couple of months.

Meanwhile, Cenovus received approval from the Alberta Energy Resources Conservation Board for its Narrows Lake development. The approval included the option to use a combination of steam-assisted gravity drainage and solvent aided process. SAP involves the addition of a solvent to the steam injected into the reservoir to help thin the oil and allow it to flow more freely to the producing well. This would be the industry’s first use of SAP with butane on a commercial scale.

Narrows Lake is anticipated to have a gross production capacity of 130,000 b/d and be developed in three phases. Narrows Lake, just north of Christina Lake, is jointly owned with ConocoPhillips. Project sanctioning from both companies is expected by the end of 2012. Ground work for the initial phase of 45,000 b/d gross is expected to begin this fall.

Cenovus also saw growth in its conventional oil assets in Alberta and Saskatchewan in the second quarter, partly due to better operating conditions after poor weather limited access to locations in both areas in the second quarter of 2011.

Oil production in Alberta increased 14% to more than 29,000 b/d as the company continued to focus on developing new tight oil plays on its existing lands in southern Alberta. Average oil production from the Lower Shaunavon and Bakken tight oil plays more than tripled compared with the same period last year to about 6,200 b/d due to a successful drilling program, although production continues to be affected by delays in facility construction.

Cenovus completed battery construction for the Bakken area in the second quarter, while construction continues on facilities to support the Lower Shaunavon. These are scheduled to be complete in the third quarter of 2012 and are expected to reduce trucking needs.

Second quarter operating earnings were reduced by a $68 million exploration expense attributed to a decision not to carry out further work at a small exploration play called Roncott, an area outside of Cenovus’s core Bakken area. Outlays on conventional oil production were $122 million in the quarter, up 85% year to year. Cenovus continues to explore oil opportunities on its existing fee lands in Alberta.

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