February 13, 2012

Regulators approve oilsands facility expansion

MEG Energy Corp. received approval from the provincial regulators for a multi-billion dollar expansion of the Christina Lake project, near Fort McMurray, Alberta.

The Energy Resources Conservation Board issued an approval on Jan. 31 for MEG’s multi-stage 150,000 bbls/d design capacity Christina Lake Phase 3 project.

In the decision, the board found the application meets requirements and is in the public interest.

However, the application was approved subject to two conditions.

The first of these conditions requires MEG to repair or abandon all wells that could be impacted by thermal operations in a manner that is compatible with the thermal operations.

This work must be completed prior to the commencement of steaming operations in an area.

To satisfy the first condition for several wells, MEG must provide additional information about the maximum temperature that the cement in the wells can withstand before degradation.

This information is required to determine if abandonment will ensure fluid containment within the target reservoir, once steam injection commences.

The second condition involves MEG providing the board with a cap rock integrity study in order to determine the maximum operating pressure prior to the commencement of steaming operations in the Phase 3A and 3B areas, respectively.

The remaining regulatory approvals for Phase 3 are expected in the first quarter of 2012.

According to MEG’s financial report for the fourth quarter of 2011, capital investment last year was about $900 million, with the majority of the budget invested in a strategic plan to increase bitumen production capacity to 260,000 bbls/d by 2020.

The next major stage of the growth plan, Christina Lake Phase 2B, provides for an additional 35,000 bbls/d of design capacity. About $710 million of the estimated $1.4 billion project cost has been invested.

As of Dec. 31, 2011, detailed engineering was 93 per cent complete.

All materials and project modules have been ordered, with delivery and on-site construction scheduled to continue through 2012 with completion targeted in 2013.

In addition to ongoing construction of Phase 2B, MEG’s $1.37 billion 2012 capital budget targets investments to begin development of future phases of the Christina Lake and Surmont projects, and investments in infrastructure to accommodate growth.

MEG is currently preparing a regulatory application for a multi-phase development totaling about 100,000 bbls/d at Surmont and expects to file a regulatory application in 2012.

JOC NEWS SERVICE

Print | Comment