June 23, 2010 at 6:55 pm #2616
Connacher Oil and Gas Limited Announces Ceremonial Opening of Algar SAGD Plant at Great Divide Oil Sands Complex; First Oil Sold on June 17, 2010
Press Release Source: Connacher Oil and Gas Limited On Tuesday June 22, 2010, 3:00 pm EDT
CALGARY, June 22, 2010 /CNW/ – Connacher Oil and Gas Limited (CLL – TSX) announced today the occurrence of the formal ceremonial opening of Algar, the company’s second 10,000 bbl/d steam-assisted gravity drainage (“SAGD”) plant, at its Great Divide oil sands complex in northeastern Alberta. Participants in the ribbon-cutting ceremony included The Honorable Mel Knight, Minister of Sustainable Resource Development (“ASRD”) and Richard A. Gusella, Connacher’s Chairman and Chief Executive Officer. Mr. Knight was Minister of Energy when Connacher’s Algar application was approved by the Government of Alberta and related regulatory agencies, including the Energy Resources Conservation Board (“ERCB”), Alberta Environment (“AE”) and ASRD. The event was also attended by Drayton Valley-Calmar MLA Diane McQueen, who is parliamentary assistant to Alberta’s Minister of Energy, by members of Connacher’s Board of Directors, other representatives of the Government of Alberta, three Chiefs from the Aboriginal Community, invited guests from the banking and investment community, service providers, Algar staff, members of the construction team and members of the press.
Algar was constructed on time and under budget. It has been designed for subsequent expansion to 34,000 bbl/d of bitumen production and over 100,000 bbl/d of steam generating capacity, pursuant to the company’s Great Divide Expansion Program. A photo of the plant site can be seen here http://files.newswire.ca/574/Connacher_Photo1.JPG. Regulatory approvals required for this expansion are anticipated for late 2011. This planned brownfield expansion, which contemplates the addition of a further 24,000 bbl/d of bitumen production capacity at Algar in 2012 for a 2013 startup, would increase Connacher’s total designed bitumen productive capacity, including Great Divide Pod One, to 44,000 bbl/d. We anticipate this can be accomplished at lower unit cost than the current levels of investment required for greenfield plants, in keeping with Connacher’s continuing commitment to a low capital intensity and attractive steam/oil ratios (“SOR”) for its oil sands operations, assisted and enhanced by continuing technical innovations which the company has introduced or plans to introduce. These include the use of high temperature electrical submersible pumps, natural gas coinjection and SAGD plus, using solvents with steam to enhance well productivity and recoveries.
In addition to construction of the Algar plant and site, Connacher constructed three well pads on which there are situated 17 horizontal SAGD well pairs. At this date, 14 well pairs are undergoing steam circulation, designed to heat up the McMurray reservoir before actual steam injection. Steaming of the remaining three well pairs will be initiated in the next several days. Full steam injection and bitumen production is anticipated for August 2010, or approximately 90 days after the initiation of steam circulation, which commenced in late May 2010.
Connacher is also pleased to announce that it has already sold its first diluted bitumen (“dilbit”) from Algar. The first load was transported by a contract carrier to market on June 17, 2010. A photo of this can be seen here: http://files.newswire.ca/574/Connacher_Photo2.JPG. We will continue to market available dilbit recovered during the circulation phase with progressively rising volumes anticipated as the reservoir temperature increases with the passage of time. As indicated, the conversion to full production at Algar is anticipated to occur during August 2010. SAGD well pairs will be successively brought onstream during the rampup phase throughout the balance of 2010 and into 2011, as required. Connacher also anticipates achieving commerciality at Algar during the fourth quarter 2010, when volumes and sales are sufficient, on a sustainable basis, to more than cover related costs, including operating costs and royalties. At the time of commerciality, Algar production and related costs will be booked in Connacher’s accounts.
Connacher forecasts bitumen production at Algar will approach 7,000 bbl/d by year end 2010 and average approximately 6,740 bbl/d during the fourth quarter 2010 (1,685 bbl/d on a full year 2010 annualized basis), which with anticipated production from Pod One will contribute to a target annualized 2010 level of total corporate bitumen production exceeding 10,000 bbl/d, with a 2010 exit rate of between 16,000 and 17,000 bbl/d. This suggests significant and sustainable growth in 2011 production, on both a quarterly and annualized basis, as compared to the current year.
Significant key learnings from our Pod One experience were introduced at Algar. As a consequence, we anticipate a healthy and vigorous rampup of bitumen production and continuing improvements in plant efficiency, given our strong emphasis on meeting and surpassing established environmental standards for air, water, carbon emissions and wildlife. We set a new standard for wildlife monitoring during construction, including the construction of caribou crossings at key points along our infrastructure rights of way.
Our plant is designed to recycle over 90 percent of the water used in our boilers to make steam. Our water source is from the subsurface and is non-potable; we do not use any surface water at Algar or at Great Divide Pod One. We are constructing a cogeneration plant for power and supplemental steam, which will further enhance efficiency. Surplus power generated once the plant is onstream will be sold into the regional grid, thereby reducing the use of power generated by burning coal, further enhancing air quality due to lower overall emissions as an indirect consequence of our power generating activity.
We worked effectively with six Aboriginal groups with regional interests during the construction phase of Algar and anticipate continuing this positive relationship during our planned 25 year life of the projects in the area. As an example, we created 36,000 man days of Aboriginal employment during the construction phase at Algar.
Connacher is a pioneer in the development of a modular approach to plant construction in the oil sands. We emphasize the efficiency of smaller scale operations, designed to be applied in a modular fashion using oilfield techniques to effect timely and cost-controlled expansion in the business. Our successful approach is aligned to the nature and scale of the accumulations we have identified on our main lease block at Great Divide, where through the successful use of 3D seismic, innovative interpretation of data and selective core hole programs, we have been able to grow our reserve base and productive capacity in a quick, efficient and consistent manner. Only approximately 15 percent of our total oil sands acreage holdings have thus far been evaluated in this manner, so we envisage significant and sustainable growth of our reserves and resources on a prospective basis. We continue to anticipate surpassing our goal of 50,000 bbl/d of bitumen production from the Great Divide main lease block by 2015 and we envisage additional programs to explore our other holdings in the region and at Halfway Creek, situated approximately 25 miles south of Fort McMurray.
Available with this press release are two pictures of our operations. One is a picture of the first oil hauling truck, which arrived on site on June 17, 2010 to pick up our first batch of Algar dilbit for sale into the market. We have also attached a very recent overhead view of our plant, taken on the same day and we have included a Key Facts sheet which details some of the interesting statistics related to Algar.
Algar is another significant achievement for Connacher and further advances the company’s goals and objectives. We had excellent cooperation from our service providers and suppliers during the construction phase. We have also been fortunate to attract new key field employees to complement the excellent staff we had put in place at Pod One. These individuals are already working effectively with each other, with our head office engineering and operations group and with all other departments in the company in their collective pursuit of excellence in all of our operations and business activities.
Connacher is a Calgary based crude oil, natural gas and bitumen producer. We hold extensive bitumen reserves at Great Divide in northeastern Alberta and now have two 100 percent-owned, 10,000 bbl/d SAGD oil sands plants and 36 SAGD well pairs from which the bitumen is produced. We also own a 9,500 bbl/d heavy oil refinery located in Great Falls, Montana and maintain an approximate 19 percent equity stake in Petrolifera Petroleum Limited, active in South America. Our common shares and convertible debentures are listed for trading on the Toronto Stock Exchange.
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