Southern Pacific on Track to Submit First Oil Sands Application by Mid-2009
18 September 2008 - 11:00PM
Marketwired
Southern Pacific Resource Corp. ("Southern Pacific" or "the
Corporation") (TSX VENTURE: STP) is pleased to provide an update on
its development plans for its first oil sands project on its McKay
block in the Fort McMurray region of northern Alberta.
After a successful 32-well coring program at McKay this past
winter, Southern Pacific has assembled a project team to prepare
its first in-situ steam assisted gravity drainage (SAGD) project
application. This team consists of Southern Pacific staff and
consultants with demonstrated abilities to design, apply for and
construct commercial SAGD projects.
Throughout the first half of 2008, this team has been engaged in
completing the necessary work required for an application that will
be submitted to the Energy Resources Conservation Board (ERCB) and
Alberta Environment. The anticipated timing for this submission
remains on schedule for the second quarter of 2009.
Environmental Perspective
The initial base line data was collected in July 2008 and a
central processing facility site was selected. The plant site is
flat, unforested, and in an area where non-commercial bitumen
deposits exist so as not to sterilize recoverable deposits by
rendering them unrecoverable. Cap rock studies have also been
completed to ensure the integrity of the SAGD process. Both the
laboratory analysis and geologic mapping support high quality cap
rock over the project area. A water source study has been completed
and locations have been selected to drill and test the potential
water sources during the winter of 2008/2009.
Technical Process Planning
A number of initiatives have been completed or are well
underway. Reservoir simulation work is in progress and the initial
results are encouraging. Based on the results, engineers have now
prepared their first draft of the facility design study. The
initial three wellpads have been tentatively selected and designed
to bring production levels to 10,000 barrels per day (bbl/d) of
bitumen. It is anticipated that up to seven SAGD well pairs will be
drilled on each pad, totaling 20 SAGD well pairs for the initial
start-up. The final engineering Design Basis Memorandum should be
completed by the end of October.
Infrastructure planning has also begun. Discussions with Alberta
Sustainable Resource Development and surrounding lease owners have
determined an acceptable route for an all-weather road into the
area. It is expected that portions of the road cost will be shared
by a number of industry partners. An application for a fuel gas
delivery point has been made to TransCanada Pipelines. There is a
gas transmission line within eight miles of the project site.
Discussions with ATCO for power have been initiated and a number of
parties have expressed an interest in participating in a
cogeneration (COGEN) facility on the site. A COGEN facility would
be very complementary to the SAGD process because the steam that is
a by-product of the facility can be used to supplement SAGD steam
injection requirements.
The Corporation has placed effective consultation as a top
priority for this project, and the stakeholder consultation process
for the project is well underway. Several stakeholders are part of
our consultation plans including five First Nations, Metis locals,
industry representatives, three regulatory bodies and other
interested parties. Southern Pacific has the advantage of having
already developed positive relationships with these stakeholders
through its past winter drilling programs. A public disclosure
document will be used in conjunction with Southern Pacific's
consultation discussions throughout the fall and winter and will
appear on the Corporation's website when completed.
The plans for winter 2008/2009 activity in McKay have been
finalized. At least 28 additional delineation wells will be drilled
in and around the six-section project area to fully define the
underlying bitumen resource. This will bring the density of
drilling in the project area to eight wells per section. A 3D
seismic program will be shot over the project area to further
enhance the definition of the resource. The necessary equipment to
complete this work has been secured and applications will be
submitted over the next month. This work must be completed prior to
the project application submission as required by the ERCB.
Operations in the field will commence shortly after freeze up and
are expected to be completed by mid-March 2009.
The Corporation had working capital of $19.5 million as of June
30, 2008. The anticipated net cost of the above McKay project
activities is budgeted at $14 million. Based on this estimate, all
of the above activities would be funded through Southern Pacific's
working capital. The Corporation expects to deliver an application
to the ERCB and Alberta Environment in the second quarter of
2009.
Once the application has been submitted, provided there are no
outstanding issues surrounding contingent resources at McKay,
Southern Pacific's bitumen in this project area would be eligible
to be reclassified as Probable Reserves. The Corporation expects to
use the cash flow from its initial project to backstop additional
in-situ projects on its 112,000 net acres of oil sands leases.
Safe Harbour
Statements in this press release may contain forward-looking
information including expectations of future operations, operating
costs, commodity prices, administrative costs, commodity price risk
management activity, acquisitions and dispositions, capital
spending, access to credit facilities, income and oil taxes,
regulatory changes, and other components of cash flow and earnings.
The reader is cautioned that assumptions used in the preparation of
such information may prove to be incorrect. Events or circumstances
may cause actual results to differ materially from those predicted,
a result of numerous known and unknown risks, uncertainties, and
other factors, many of which are beyond the control of the company.
These risks include, but are not limited to, the risks associated
with the oil and gas industry, commodity prices and exchange rate
changes. Industry related risks could include, but are not limited
to, operational risks in exploration, development and production,
delays or changes in plans, risks associated to the uncertainty of
reserve estimates, health and safety risks and the uncertainty of
estimates and projections of production, costs and expenses. The
reader is cautioned not to place undue reliance on this
forward-looking information.
The TSX Venture Exchange does not accept responsibility for the
adequacy or accuracy of this release.
Contacts: Southern Pacific Resource Corp. Dave Antony CEO (403)
269-5219 Email: dantony@shpacific.com Southern Pacific Resource
Corp. Byron Lutes President (403) 269-1529 Email:
blutes@shpacific.com Website: www.shpacific.com
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