JAPAN CANADA OIL SANDS LTD. HANGINGSTONE DEMO PROJECT 2004 Presented on Monday, March 7, 2005 Presentation Outline

Transcription

1 Thermal In-Situ Scheme Progress Report JAPAN CANADA OIL SANDS LTD. HANGINGSTONE DEMO PROJECT 2004 Presented on Monday, March 7, 2005 Presentation Outline 1. Introduction Project Background, Activity Summary & Key Learnings 2. Compliance and Facility Performance Compliance & Approvals Status Flare Gas Conservation Water Reuse Production Measurement and Reporting Product Transportation Update 3. Reservoir Production Performance and Recovery Update 4. Geosciences Geology Update 5. Forward Demo Project Schedule Demo & Proposed Commercial Project Approvals Status

2 Introduction

3 Project Background JACOS member of PCEJ consortium (Petro( Petro-Can, Nexen,, Imperial, JACOS) SAGD Demo Project on former site of PCEJ Hangingstone CSS Project CSS Project mothballed in 1994 JACOS commenced development of SAGD Hangingstone Demo in 1997 Phased Project Development 1999 Phase 1; A, B wellpairs, 2000 bbl/day facility design capacity (original CSS site) 2000 Phase 2; C, D, E wellpairs, 4000 bbl/day facility design capacity added (new facility) Phase 3; F, H, I wellpairs, expansion of Phase 2 facilities to 8000 bbl/day design (expansion of new facility) 2003 J, K wellpairs,, de-bottlenecking of facility to achieve design bitumen processing capacity (10,000 bbl/day) 2004 L,M,N wellpairs,, further debottlenecking of facility

4 Q Activity Summary Drilled control wells for O, P, Q, N horizontal well pairs Drilled L, M & N horizontal well pairs Completed the abandonment of observation wells Full startup of gas recovery project Q Constructed facilities to tie-in in L, M & N well pairs and started steam circulation Q L, M & N well pairs begin bitumen production Restarted Plant 1 operations to handle increasing production (shut-in since October 2002) Q Drilled control wells for O, P, Q horizontal well pairs Drilled evaluation wells on the 3.75 section project area Completed several other minor plant debottlenecking/optimization projects (throughout 2004) Key Learnings Cementing thermocouples is an effective option for completing temperature observation wells that will avoid casing failures and expensive future abandonment Continuous improvement of well bitumen allocation process as experience erience and data are gained

5 Compliance & Facility Performance

6 Compliance & Approvals Status To the extent of our knowledge JACOS is in full compliance with all of the terms and conditions of Scheme Approval #8788. Full implementation of gas recovery in 2004 (details further in report) Continued to exceed minimum water recycle ratio requirement in (details further in report) Received approval amendment for 3 additional SAGD well pairs (O, P, Q) (Q1 2005) Existing scheme approval expires May 1, 2006.

7 Facility Performance Achieved a single day production record of 9600 bbl/day Reduced plant energy intensity by nearly 10% with a combination of initiatives including gas recovery and additional heat recovery from produced fluids Maintained high water recycle ratio despite higher plant throughput

8 2004 Activity Summary Flare Gas Conservation Started up produced gas recovery facilities in Plant 2 - December Started up Plant 2 low-pressure flare system VRU in February Produced wellhead vapours from all wells, including those that produce liquid to Plant 1, is being recovered in Plant Produced Gas Volume 2004 Produced Gas Recovery by Percent volume, 10^3 sm3/day FLARED PRD GAS REC'D PRD GAS Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FLARED PRD GAS REC'D PRD GAS Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

9 2004 SO2 Emissions 2004 SO 2 Emissions License Limit tonnes/day 0.80 P1 LP Flare P1 HP Flare P2 LP Flare P2 HP Flare P2 Boiler Stacks 0.70 SO2 (tonnes/day) Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04

10 Water Reuse Performance Data Source Water m3 Steam Injected m3 (CWE) Produced Water m3 Disposal m3 Recycle Ratio [1] [2] Jan 8,127 89,409 87,467 2, Feb 6,872 84,592 81,898 1, Mar 10,075 90,278 84,738 2, Apr 10,399 74,368 70,512 1, May [3] 14,951 95,134 84,053 2, Jun 14,559 96,401 84, Jul 12, ,538 98,510 1, Aug 19, , ,471 4, Sep 18, , ,268 6, Oct 23, ,751 92,913 7, Nov 21, , ,817 8, Dec 19, , ,701 5, Total 2003 Total 180, ,460 1,213, ,066 1,127, ,557 44,808 37, [1] Does not include water vapour separated at wellheads, which would increase produced water volume and reduce recycle ratio. Method of measuring vapour is being investigated and will be incorporated for 2005 reporting once resolved. A 2 4% reduction in recycle ratio is anticipated. [2] EUB Recycle Definition: (Steam Injected Source Water Makeup)/Produced Water [3] Reported source water volume for May 2004 was incorrect due to a meter error. An amendment will be filed.

11 Production Measurement and Reporting JACOS reports as a Prorated Battery to the Petroleum Registry Continue to use mass balance method to allocate well bitumen - volumes are allocated to individual wells by fluid balance around well pairs or patterns, then prorated to total plant bitumen volume Cut measurement by density not viable because bitumen & water density are similar, and combined accuracy of all the measured variables was not fine enough for an acceptable estimate. Continue to monitor development of oil cut meter technologies but t to date none exist for the process conditions and fluid characteristics of this project (JIP to evaluate technologies couldn t t recreate necessary conditions in lab) Bitumen allocation for some wells has been confirmed through isolation of production from specific wells into Plant 1. (Learnings( are used to improve allocation process) 2004 fluid production from M well was reported incorrectly due to a meter error. Volumes will be amended in the registry (23% reduction in produced water) Continuing to assess allocation of well bitumen project wide, and d if necessary will file amendments

12 Product Transportation Study Considerations Work is continuing in 2005 to progress a viable and economic alternative to trucking JACOS remains cognizant of changes in the area while looking for opportunities Factors include: delivery point/pricing, delivery conditions (diluent( diluent,, hot?), diluent sources/pricing/receipt points, and operating approach (batch or continuous delivery), commercial terms Options That Have Been Explored Dilbit diluent line from Rainbow to Hangingstone; dilbit blend back to Rainbow into Edmonton Synbit/Dilbit single synbit/dilbit line to Athabasca pipeline; diluent system at Hangingstone would be included in design (could provide feed to Long Lake upgrader) Hotbit/Synbit line to Edmonton only viable in conjunction with other developments Forward Discussions with potential shippers and partners will continue in 2005

13 Reservoir

14 Reservoir Performance Summary Total field bitumen rate (average for December 2004 was 1400 m3/day) Cumulative SOR to date ~ 3.15 Total Bitumen produced to December 31, 2004 ~1.248MM m3 (~7.8MM bbls) Currently producing from 12 SAGD wells OOIP for the 3.75 section area is 22MM m3 Recoverable bitumen is estimated at 8.7MM m3 (~39% Ultimate Recovery)

15 2004 Net Pay Map

16 TOTAL FIELD PERFORMANCE START-UP TO DECEMBER 31, RATE (m 3 /D) 4/1/99 6/1/99 8/1/99 10/1/99 12/1/99 2/1/00 4/1/00 6/1/00 8/1/00 10/1/00 12/1/00 2/1/01 4/1/01 6/1/01 8/1/01 10/1/01 12/1/01 2/1/02 4/1/02 6/1/02 8/1/02 10/1/02 12/1/02 2/1/03 4/1/03 6/1/03 8/1/03 10/1/03 12/1/03 2/1/04 4/1/04 6/1/04 8/1/04 10/1/04 12/1/04 SOR / CUMULATIVE SOR / NUMBER OF WELLS Overall Performance - Rates Total Field Steam Total Field Bitumen Total Field SOR Total Field Cumulative SOR Number of Wells Producing

17 5,000,000 4,750,000 4,500,000 4,250,000 4,000,000 3,750,000 3,500,000 3,250,000 3,000,000 2,750,000 2,500,000 2,250,000 2,000,000 1,750,000 1,500,000 1,250,000 1,000, , , ,000 0 TOTAL FIELD CUMULATIVE VOLUMES OF BITUMEN & STEAM AND CUMULATIVE SOR (START-UP TO DECEMBER 31, 2004) CUMULATIVE VOLUME (m 3 ) 4/1/99 6/1/99 8/1/99 10/1/99 12/1/99 2/1/00 4/1/00 6/1/00 8/1/00 10/1/00 12/1/00 2/1/01 4/1/01 6/1/01 8/1/01 10/1/01 12/1/01 2/1/02 4/1/02 6/1/02 8/1/02 10/1/02 12/1/02 2/1/03 4/1/03 6/1/03 8/1/03 10/1/03 12/1/03 2/1/04 4/1/04 6/1/04 8/1/04 10/1/04 12/1/04 CUMULATIVE SOR Overall Performance - Cumulative Total Field Steam Total Field Bitumen Total Field Cumulative SOR

18 Reservoir Performance Statistics as of December 31, 2004 Phase 1 Cumulative Steam Injected (m3) Cumulative Bitumen Produced (m3) Cumulative Water Produced (m3) Cumulative SOR Cumulative WOR Recovery wrt OBIP (%) A 609, , , (*) B 824, , , (*) Phase 2 C 327,666 88, , D 298,712 73, , E 452, , , Phase 3 F 46,219 3,434 21, H 424, , , I 474, , , J & K J 183,707 65, , K 167,862 59, , L, M & N L 40,955 14,706 37, M 55,186 32,895 48, N 22,268 8,139 20, Phase 1 1,434, ,400 1,381, Phase 2 1,079, , , Phase 3 945, , , J & K 351, , , L, M &N 118,408 55, , Field Total 3,928,554 1,247,911 3,616, (*) OBIP is calculated for a confined pattern with a 100m well spacing. It is anticipated that the steam chamber for A & B pairs has grown beyond a 100m well spacing, and the relevant OBIP for A & B pairs should be larger and consequently the actual recovery factor should be lower.

19 Reservoir Performance Statistics for 2004 Annual Steam Injected (m3) Annual Bitumen Produced (m3) Annual Water Produced (m3) Annual SOR Annual WOR Phase 1 A 113,562 45, , B Phase 2 147,917 22,064 98, [1] [1] 4.47 C 73,445 20,221 64, D 65,893 12,935 60, E 123,305 50, , Phase 3 F H 161,785 52, , [2] [2] 2.49 I 130,619 52, , J & K J 141,230 51, , K 137,272 48, , L, M & N L 40,955 14,706 37, M 55,186 32,895 48, N 22,268 8,139 20, Phase 1 261,479 67, , Phase 2 262,643 83, , Phase 3 292, , , J & K 278, , , L, M &N 118,408 55, , Field Total 1,213, ,321 1,127, Reservoir sweep occurring from B to A 2. Reservoir sweep occurring from H to I

20 Existing 12 Well Pair Forecast 5, , , , , Rate (m3/d) 2,500 2, SOR 1, , Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Steam (Actual) Steam Steam Bitumen (Actual) Bitumen Bitumen SOR (Actual) SOR SOR (1.0)

21 Future Bitumen Production Profile 2,000 1,800 1,600 3 Pairs (O, P & Q) Adding pairs to sustain 10,000 BPD 1,400 3 Pairs (L, M & N) Bitumen Rate (m3/d) 1,200 1, History as of Dec 2004 Prediction of existing 12 pairs Prediction of all pairs including existing 12 pairs Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

22 Geosciences

23 2004 Drilling Review 8 vertical control wells drilled 1 well to control the N well pair toe position 1 well to explore the resource extension to the east 6 wells for control on the horizontal well pairs north of the J pair Used for facies identification and to vertically position the horizontal well pairs 3 horizontal well pairs drilled (L, M and N) Well pair lengths are controlled by the extension of facies identified at the control wells by 3D seismic (inversion and multi-attribute analysis)

24 2004 ACTIVITY

25 2005 Drilling Activity 3 horizontal pairs (O, P and Q), 3 control wells, 14 evaluation wells Similar approach as 2003 and 2004 well pairs using well data to confirm the facies in the reservoir interval and using the 3D seismic to control the facies extension 3 control wells for each pair To explore variations in the reservoir of the shale facies as indicated by the 3D seismic To vertically position horizontal wells pairs

26 2005 ACTIVITY

27 Forward Demonstration Project Planned Activity Drill O, P, Q well pairs in Q Tie-in in O, P, Q well pairs in Q and startup as required to reach production target of 10,000 bbl/day by year-end end Conduct further plant capacity debottlenecking (as required) & optimize reservoir processes to achieve target production of 10,000 bbl/day by year-end end Tie-in in new blowdown transfer line from Plant 1 to Plant 2 evaporator system with a view to minimizing disposal volumes Plan to submit G51 application to dispose waste water into depleted SAGD patterns Demonstration Project Approvals Renewal application for scheme approval (expiring May 1,2006) is planned for submission by November 1, It will include the full depletion plan for the Demo operation for the next 20 years Compliance with Directive 017