June 6, 2012

Cenovus gets approval for Narrows Lake

RICHARD GILBERT

staff writer

Cenovus Energy Inc. received approval from the provincial regulators to proceed with the construction of the Narrows Lake oilsands project, which is located near Conklin in northern Alberta.

“The approval of Narrows Lake is a significant achievement for Cenovus as we move forward with our plan to double the company’s net asset value between 2010 and 2015,” said Brian Ferguson, Cenovus President & Chief Executive Officer. “This milestone takes us another step closer to bringing on production at Narrows Lake.”

Preparations for the Narrows Lake development are already well under way with a Cenovus team in place, initial equipment ordered and engineering work in progress. Ground work for the initial phase of 45,000 bbls/d is expected to begin this fall.

More than 200 stratigraphic test wells have been drilled at the project in support of the regulatory application and development plan. The project would involve the construction of oil treatment facilities, steam production facilities, water treatment facilities, sulphur removal facilities, 18 well pads to support 139 well pairs, water source wells, and water disposal wells.

The project is unique because Cenovus is proceeding with the first ever commercial-scale solvent aided process (SAP). SAP involves the addition of a solvent to the steam injected into the reservoir to thin the oil and allow it to flow more freely to the producing well.

Initially, SAP with butane will be demonstrated on 25 per cent of the wells and eventually SAP will be phased across the entire Narrows Lake operation.

Compared to steam-assisted gravity drainage (SAGD) projects, Cenovus anticipates its SAP projects will have 10-20 per cent higher initial capital costs.

SAP technology would additionally involve the construction of solvent recovery facilities. The company also anticipates higher capital costs, because Narrows Lake is a new project with no existing infrastructure in place. The additional capital costs are expected to be offset by increased production volumes, increased oil recovery and lower operating costs due to SAP. Project approval from Cenovus and its partner, ConocoPhillips, is expected by the end of this year.

First production at Narrows Lake is anticipated in 2017, with the possibility of production starting in 2016, depending on industry activity and the associated demand for labour and materials.

The project is anticipated to have gross production capacity of 130,000 barrels per day (bbls/d) and be developed in three phases, with a project life of up to 40 years.

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