Installation of the Water Treatment Plant
The Company's Sawn Lake oil sands properties are located within the Peace River oil sands area of Alberta where the oil sands deposits are buried deep beneath the earth’s surface and cannot be open pit mined. These oil sands deposits can be developed by drilling beneath the surface and using various in-situ recovery methods to extract the oil sands. Because these oil sands deposits must be recovered from beneath the surface they leave a smaller environmental surface footprint than open pit mining.
The Company entered into a Demonstration Project Joint Operating Agreement (the "SAGD Project”) with one of the Company's joint venture partner's on the Company's 50% (25% after Farmout) jointly owned oil sands properties located in North Central Alberta, Canada, also known as the Sawn Lake field.
The thermal recovery process chosen for this project is Steam Assisted Gravity Drainage ("SAGD"). The process involves injecting steam into the oil sands deposit through a horizontal well (the injection well) which is located approximately 5 to 7 meters above the horizontal producer well. Pressure then pushes the steam into the oil sands while the heat of the steam allows the bitumen to flow easier. As the steam soaks into the oil sands deposit, the heated bitumen flows into the lower well (the producer well) and is pumped to the surface.
As shown in the map below, the Company's joint Sawn Lake SAGD oil sands project is located in the section 30 within township 91, range 12, west of the 5th meridian of the Peace River oil sands area of Alberta, Canada.
The first SAGD well pair was drilled to a vertical depth of approximately 650 meters and have horizontal legs of 780 meters each.
Click on the QuickTime links below to see videos of the construction of our SAGD Project.
Construction of the SAGD steam facility was completed in May of 2014, and on September 16, 2014, the first SAGD well pair started producing oil in the form of bitumen.
Final construction of the SAGD steam facility was completed and steam injection at the Sawn Lake SAGD demonstration project commenced in May 2014.
Production commenced in September 2014, and the steam chamber reached the top of the Bluesky sandstone formation in October 2015. Production in January and February of 2016, averaged 615 barrels of oil per day (â€ťBOPDâ€ť) with an instantaneous steam-oil ratio (â€ťISORâ€ť) of 2.1.
The average monthly production rates for this first year have outperformed the estimated production rate type curve as determined by our independent reservoir engineering firm, as shown in the production graph illustration.
This project is a significant step towards establishing a commercially viable SAGD project at Sawn Lake and to demonstrate that the SAGD process works in the Bluesky reservoir. It is also providing an indication of the productivity of the reservoir and the amount of steam injection required to produce the bitumen, which are key components in assessing the potential for SAGD development at Sawn Lake.
As previously stated, the demonstration project commenced production in September 2014, and has successfully captured the key data associated with the objectives of the demonstration project.
The demonstration project has:
Given the current low price environment for bitumen, our joint venture partners have suspended the Sawn Lake Demonstration Project operations at the end of February 2016. This project has provided the necessary data to make an application the Alberta Energy Regulator (AER) to expand the SAGD project at Sawn Lake. This proposed expansion is expected to reactivate the demonstration project facility and well pair as part of a potential commercial expansion of the project. The Sawn Lake reservoir model and contingent resource reports are being updated to incorporate the results of the demonstration project, and the application for a potential expansion of the demonstration project site, was submitted at the end of April.Â