Canada-based MEG Energy’s board of directors has approved 2011 capital investment of approximately $900 million and the final cost estimate for the 35,000 barrels per day Phase 2B oil sands expansion at the Christina Lake in-situ project. MEG utilizes steam-assisted gravity drainage ( SAGD) extraction methods.
The first two production phases at the Christina Lake Project, Phase 1 and Phase 2, commenced production in 2008 and 2009 respectively, and have a combined design production capacity of 25,000 bbls/d. In June 2010, production from Phases 1 and 2 averaged approximately 26,400 bbls/d. Phase 2B has received regulatory approvals and MEG plans to commence site construction in early 2011. Once Phase 2B is complete, MEG’s combined production capacity at the Christina Lake Project is expected to reach 60,000 bbls/d.
With the completion and approval of the final cost estimate of Phase 2B, we are commencing horizontal drilling next week and initiating facilities construction in 2011. Phase 2B is an important step in implementing our strategy of having production capability of 260,000 barrels per day by 2020.—Bill McCaffrey, Chairman, President and CEO
The 2011 capital budget supports the company’s key strategic initiatives:
Expand and further define MEG’s in situ oil sands resource. MEG’s 1.7 billion barrels of proved and probable reserves and 3.7 billion barrels of best estimate contingent resources support current production and substantial future growth. The 2011 budget includes $80 to $90 million for core drilling and seismic programs at Christina Lake, Surmont and Growth Properties. This program is designed to identify additional resource on MEG’s 800 square miles of 100%-owned oil sands leases and to support future growth.
Staged production growth. The Corporation is developing its oil sands resource in multiple phases to minimize risk and lever the success of its first commercial project at Christina Lake. The board of directors has approved the $1.4 billion cost estimate for the 35,000 barrels per day Phase 2B expansion.
By the end of 2010, approximately $200 million will have been invested in engineering, site preparation and horizontal drilling for Christina Lake Phase 2B. The remaining $1.2 billion is to be invested over the next two to three years including approximately $450 million in 2011.
MEG has also budgeted approximately $200 million for key infrastructure such as operations staff housing, a construction camp, pumping stations on the Access Pipeline, and preliminary engineering for future phases of development. These investments will benefit MEG’s current operations and support its ongoing growth.
Operations. Existing Christina Lake operations has exceeded name plate capacity of 25,000 barrels per day with a steam oil ratio below 2.5. MEG intends to invest $40 to $50 million on maintenance and sustaining capital in 2011. In addition, opportunities are being pursued to further enhance production from existing Christina Lake facilities.
MEG anticipates bitumen production volumes averaging 25,000 to 27,000 barrels per day during 2011. This takes into account a September 2011 annual turnaround at the Christina Lake facility. Non-energy operating costs are budgeted to average $9.00 to $11.00 per barrel in 2011.