Sept/Oct 2008

Saskatchewan: the new frontier

Oilsands Quest spearheads the province’s sunrise oil sands industry

By M. Kerawala


Well drilling and completion operations at test site No. 1

What is Saskatchewan known for? Pioneering public healthcare? Yes, but hardly a concern of this magazine. Wheat? True, but again, of little interest here. Potash and uranium? Bingo. How about oil sands? If your answer was no, you might just want to reserve judgment. Because while neighbouring Alberta is the oil sands capital of Canada, things are also stirring in the Land of Living Skies. An oil sands boom is dawning in Saskatchewan and one company is quickly taking on the role of modern-day frontiersman, opening up new vistas of development.

A new frontiersman

This pioneering company is Oilsands Quest Inc. Founded with a belief in the prospects of oil sands in Saskatchewan, the company, since late 2004, has focused on extending the known boundaries of viable deposits in the Athabasca area and is conducting the first major oil sands exploration in the province’s history.

Oilsands Quest’s strategic advantage comes from its possession of Canada’s largest contiguous oil sands holdings, including 730,598 acres of permits and licenses in the Athabasca region. The company also holds a 22,773-acre oil sands lease northwest of Fort McMurray, Alberta, and over 489,000 acres of oil shale permits in Saskatchewan’s Pasquia Hills.

Thinking outside the lines

The simple idea that provincial borders cannot constrain geology underpins Oilsands Quest’s success. CEO Christopher Hopkins and his team were convinced that Saskatchewan held a basin edge play. Launched in December 2005 and led by Errin Kimball, vice president of exploration, and Simon Raven, chief geologist, Oilsands Quest’s first drilling program was modest — just 25 holes. In January 2006, the first hole intersected 18 metres of McMurray formation at 16 per cent bitumen saturation. Within a year, the area was designated the Axe Lake Discovery. The sun had risen on Saskatchewan’s oil sands industry.

Kimball conceded that Oilsands Quest can’t take credit for the discovery. “We had reviewed Saskatchewan Energy Resources records from legacy drilling by Shell and Gulf in the early 1970s that noted bitumen intercepts,” he recollected. “We applied that information to our geological framework and developed a depositional model that was consistent with other viable oil sands deposits in the area,” he continued, explaining the masterstroke. Effectively, the company simply took its existing expertise to new grounds. “As Hopkins likes to say, ‘when you’re in the bitumen, stay in the bitumen,’” Raven added with a chuckle.

However, it was not all chuckles from the outset. “It took us three years to gather the data to prove what we knew all along,” recalled Kimball. By the end of the winter 2007-08 drilling season, Oilsands Quest had drilled 324 holes in Saskatchewan, including 264 at Axe Lake and another 25 on contiguous lands on the Alberta side of the border. This drilling resulted in the Raven Ridge Discovery, which is on trend with Axe Lake and a number of projects in Alberta.

Their sheer doggedness paid off. According to independent estimates by McDaniel & Associates Consultants Ltd. in June 2008, Axe Lake holds a high estimate (P10) of 2.3 billion barrels of discovered bitumen resources. Kimball and his colleagues are confident the resource numbers will keep growing. “We believe Axe Lake has the potential for multiple projects,” said Kimball, adding that contiguous holdings on the Alberta side — at Raven Ridge and Wallace Creek — hold the possibility of more. Discovered and undiscovered bitumen resources at Axe Lake and Raven Ridge are independently estimated at 6.5 billion barrels (high estimate). As the first major discovery, Axe Lake is likely to become Saskatchewan’s first oil sands project.

Exciting times ahead

The Axe Lake deposits contain homogenous, continuous, coarse-grained bitumen-rich oil sands, with good porosity and permeability and excellent bitumen saturation. They are located in the McMurray oil sands formation with average pay zones of over 20 metres at depths suitable for in situ recovery. To determine the most effective methods of in situ recovery, Oilsands Quest will commence a program of reservoir field tests this fall at one of three test sites, confident that testing will result in a formal declaration of commercialization.

The company is currently assessing a fast-track approach to a potential commercial project, and in June 2008 announced the initiation of engineering plans for its first 30,000 barrel per day production facility. It is projected that Saskatchewan’s first oil sands project could be completed in 2012 or 2013. Meanwhile, exploration continues apace on the huge contiguous holding, over 95 per cent of which remains to be drilled.

While year one was spent proving the existence of bitumen deposits and year two was spent scouring the border to determine where to go next, Axe Lake was the focus in year three. “In years four and five, we will continue with delineation of Axe Lake and with exploration on the rest of our contiguous holdings,” Kimball declared.

Meeting the challenges

Too experienced to rest on early laurels, Kimball and Raven are fully cognizant of challenges, the greatest of which is posed by the remoteness of the holdings. Infrastructure is thin in northwestern Saskatchewan. From Oilsands Quest’s base camp, the nearest large community is the northern village of La Loche, 185 kilometres away. “We started building site infrastructure, including our main access road, in November 2005 and, since then, we’ve built an airstrip,” Raven recounted. “There’s no power to our site, so our camps are totally self-sufficient.”

Another challenge arose because, unlike in Alberta, the oil sands industry is a new development in Saskatchewan. Kimball recalled, “At first, the regulatory approval process was a little slow.” However, he added, “the process and timelines have improved considerably. The provincial government is easy to work with and everyone is following our progress with interest.”

Additionally, Oilsands Quest faces the scrutiny of Saskatchewan’s people, who have no prior experience of sharing social, cultural and economic space with an oil sands operator. But the company sees this as an opportunity. The company has conducted province-wide public information campaigns, primarily by advertising in dailies, community newspapers and trade publications. Senior personnel have also addressed organizations like chambers of commerce and rotary clubs in several cities and participated in regional economic development conferences and workshops.

The company has regularly held open houses and participated in high school career fairs. Oilsands Quest has been realistic about the prospects and responsible about managing public expectations. At career fairs, company personnel explain the lead times and the types of careers and encourage students to follow educational routes that can help secure industry jobs. Two dedicated community liaison personnel are stationed at La Loche.

Beyond building infrastructure, securing regulatory approval and forging community ties, Oilsands Quest ultimately relies on its people. “Our colleagues have significant experience with other oil sands exploration projects,” noted Kimball, explaining that members of the core management team were part of the original operations group for Synenco’s Northern Lights Project. “Now, as the company moves into development, we are adding people with extensive experience in reservoir engineering and production.

With this influx of new talent and continued progress on development plans, Saskatchewan is all set to take its place next to Alberta as a significant oil sands producer in Canada.

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