Saskatchewan oil sands development encouraged

Saskatchewan, which holds oil and gas sales six times/year, held its first public offering of oil sands rights at its Aug. 16 sale.

By OGJ editors
HOUSTON, Aug. 30 -- Saskatchewan, which holds oil and gas sales six times/year, held its first public offering of oil sands rights at its Aug. 16 sale. The auction for all oil and gas rights raised about $38 million, including $3.3 million for six oil sands exploration licenses.

Until the August sale, companies looking for oil sands were not required to pay for an exploration permit.

In a news release, Government Relations Minister Harry Van Mulligen called the sale historic and said it "heralds the beginning of a potential new oil sands industry in Saskatchewan."

Three Calgary-based companies bid successfully for oil sands permits. Oilsands Quest Inc. has been exploring in Saskatchewan's northwest corner for several years and Petroland Services Ltd. was the highest bidder for an oil sands exploration license, paying $1 million (Can.) for about 9,000 ha of land north of the Clearwater River in northwestern Saskatchewan. Cavalier Land Ltd. also won oil sands exploration permits on land in the northwest area of the province.

Oilsands Quest
Oilsands Quest reported July 12 that its previous oil sands discovery at Axe Lake and other previously acquired, contiguous oil sands exploration permits in northwest Saskatchewan and northeastern Alberta hold a resource potential of about 10 billion bbl of bitumen.

That includes the company's estimate of original bitumen in place (OBIP) for the Axe Lake discovery on its Saskatchewan permits "and resource potential on certain portions of the remainder of its Saskatchewan permits and its adjacent Alberta permits."

An independent consultant's estimate of OBIP for Axe Lake will be completed in the fall, but the company's estimate includes a total potential bitumen resource of 2.1-2.8 billion bbl plus another 3 million bbl for selected areas south and northeast of the Axe Lake discovery area. The remaining 4.5 billion bbl was said to be resource potential for about two townships of the company's adjacent permits in Alberta.

"Axe Lake is proving to be suitable for in-situ recovery," Oilsands Quest said. High recovery factors include thick, continuous, coarse-grained oil sands with high permeability and porosity in reservoirs at depths of 185-205 m.

Quest is awaiting approvals to continue its exploration program, but meanwhile is evaluating drilling data, performing laboratory studies for bitumen recovery, conducting environmental programs to facilitate regulatory approvals, developing engineering timelines to the field pilot plant stage, and conducting economic feasibility and risk assessment studies.

This quarter it plans to begin drilling in Saskatchewan and conducting seismic surveys in adjacent Alberta. In the fourth quarter it will undertake reservoir modeling and continue drilling in Saskatchewan and Alberta in the winter.

In 2008, it plans to drill test wells to confirm laboratory studies in the first quarter, establish a data room and initiate joint venture partnership negotiations for Axe Lake development in the second quarter, and start field pilot production in the fourth quarter.

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