Cenovus receives approval for Grand Rapids oil sands project

abarrelfullabarrelfull wrote on 21 Mar 2014 13:19
Tags: canada cenovus n-america oil-sands upstream

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Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) has received approval from the Alberta Energy Regulator (AER) for its 100%-owned Grand Rapids thermal oil sands project. The proposed project is located approximately 300 kilometres north of Edmonton, within the company’s Greater Pelican Region in northern Alberta. Grand Rapids is expected to have production capacity of 180,000 barrels per day (bbls/d) and be developed in multiple phases. The project is anticipated to have a life of 40 years.

Cenovus expects to make a decision on the timing of development later this year. Once a decision is made to proceed with Grand Rapids, Cenovus will be able to rely on existing infrastructure, including roads, power and camps at its Pelican Lake conventional heavy oil operation. The availability of existing infrastructure is expected to contribute to competitive capital efficiencies for Grand Rapids. Cenovus and its predecessor companies have been operating and producing oil in the area for more than 15 years from the Wabiskaw formation, which is a deeper geological zone.

“We’re pleased to have received regulatory approval for our fourth oil sands project,” said Brian Ferguson, Cenovus President & Chief Executive Officer. “Developing the Grand Rapids project contributes to our long-term business plan of creating shareholder value by increasing the company’s oil production capacity over the next decade.”

The company has been operating a steam-assisted gravity drainage (SAGD) pilot project at the site for more than three years and has gained a strong understanding of the reservoir. Recent production results from the two well-pair pilot have been encouraging. Cenovus plans to continue operating the pilot project to gather additional information on the reservoir.

Stratigraphic test well results have shown the reservoir to be very consistent, which Cenovus believes will provide predictable and reliable long-term production. Approximately 180 stratigraphic test wells have been drilled at the project to support the regulatory application and development plan.

As of December 31, 2013, the independent qualified reserves evaluator (IQRE) estimated Cenovus’s best estimate bitumen economic contingent resources for the entire Grand Rapids holdings at 1.5 billion barrels. The same IQRE also recognized approximately 78 million barrels of probable reserves. Cenovus expects to be able to convert a significant portion of those probable reserves to proved once the company decides to proceed with the project.

Cenovus currently has two operating oil sands projects, with Foster Creek now producing about 110,000 bbls/d gross and Christina Lake producing approximately 130,000 bbls/d gross. Expansions are continuing at both of these projects. Construction of phase A at the company’s Narrows Lake project is continuing with first production expected in 2017. Cenovus has a 50% ownership of the Narrows Lake, Foster Creek and Christina Lake projects with its partner ConocoPhillips.

A regulatory application is under review for the Telephone Lake oil sands project, which is 100%-owned by Cenovus and has a planned production capacity of more than 300,000 bbls/d. Cenovus continues to assess other oil sands opportunities within its portfolio for future development. In addition to the 129,000 bbls/d net of oil sands production capacity already built at Foster Creek and Christina Lake, Cenovus now has about 365,000 bbls/d of net oil sands production capacity under construction or with regulatory approval.

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