The new study, by Petrotech Engineering Ltd. of Burnaby, British Columbia, is based on historic data and a recent development plan produced by Derek's joint venture partner and project operator, Ivanhoe Energy. Petrotech verified the results of a preliminary plan by Ivanhoe to develop a limited area of the LAK Ranch lease using Steam Assisted Gravity Drainage (SAGD) technology.
The report notes that the Ivanhoe production model for the Lower Newcastle Channel Sand forecasts an ultimate recovery of 13 million barrels of oil from an estimated 20 MMBO of oil-in-place under approximately 450 acres of the 7,500 acre lease. This model performance is achieved by a SAGD development pattern utilizing 21 new horizontal producers with 5 new vertical injectors for each producer. Gross capital expenditures are projected to be US $35million.
The upside potential of an extended full development is dependent upon the amount of additional productive acreage on the lease that can be economically developed using SAGD.
Commenting on the report, Derek President Barry C.J. Ehrl, said the target size, reserve and production potential could change significantly as new information from a planned 3-D seismic program is evaluated and as continually evolving adaptations to SAGD technology are in introduced at the LAK Ranch.
"Industry observers have projected that enhanced oil recovery techniques such as Steam Assisted Gravity Drainage can lead to ultimate recovery of "oil-in-place" in the 50% to 70% range. Such technical applications could have a dramatic impact on the productivity of the LAK Ranch", Ehrl said.
The Petrotech report uses the definition of reserves category from the Canadian Oil and Gas Evaluation Handbook and conforms to National Instrument NI 51-101 (Standards of Disclosure for Oil & Gas Activities).
The authors of the report are John Yu, P.Eng. (Consulting Petroleum Engineer), James R. Britton, P.Geol., P.Eng. (Consulting Petroleum Geologist) and David B. Finn, A.Sc.T. (Consulting Petroleum Technologist). Mr. Yu is an Independent Qualified Person with respect to the preparation of this report. He is a registered Professional Engineer in the Province of British Columbia, having more than twenty-nine years of experience in engineering studies, evaluation of oil and gas properties, drilling, completion, production and process engineering of oil and gas operations in Canada, U.S.A., and internationally. Mr. Britton is also an Independent Qualified Person with respect to the preparation of this report. He is a registered Professional Geologist in the Province of Alberta and a registered Professional Engineer in the Province of British Columbia. He has over forty-five years of experience in oil field geological studies, evaluation of oil and gas properties, drilling, completion, and production engineering in Canada and the U.S.A. Mr. Finn has a Diploma of Engineering Technology in Natural Gas and Petroleum Technology. He has over thirty-three years of experience in oil and gas reservoir studies of Canadian and U.S. oil and gas fields.
The report estimates crude oil reserves and "oil-in-place" at LAK Ranch in the Newcastle Lower Channel Sand and the Newcastle Marine Sand as follows:
Estimated Crude Oil Reserves at Standard Conditions (60 degrees F and 14.65 psia) Newcastle Lower Channel Sand Reserve Category: Possible Location LAK Ranch: Sec. 1, 12, 13, 24, 25-T44N-R61W; Sec. 7, 8, 18, 19-T44N-R60W Formation Depth (feet) 0 to 2,300 Formation Name Newcastle Lower Channel Sand Drainage area (acres) 2,460 Net pay thickness (feet) 44.3 Rock Volume (acre-feet) 108,945.4 Porosities (percent) 22% Water saturation (percent) 40% Formation Volume Factor (rb/stb) 1.0204 Initial oil-in-place (stb/acre-feet) 1,003.6 Initial oil-in-place (Mstb) 109,334.9 Cum production to 2004/04/30 (Mstb) 26.2 Remaining oil-in-place (Mstb) 109,309 Recovery factor (percent) 12 Recoverable oil reserve (stb) 13,000,000 Permeability (mD) 759 Gas Oil Ratio (scf/bbl) less than 50 API (degree) 19 Estimated Crude Oil Reserves at Standard Conditions (60 degrees F and 14.65 psia) Newcastle Marine Sand Reserve Category: Oil-in-Place Location LAK Ranch Formation Depth (feet) 0 to 2,300 Formation Name Newcastle Marine Sand Total area (acres) 4,420 Net pay thickness (feet) 18.4 Rock Volume (acre-feet) 81,328 Porosities (percent) 22 Water saturation (percent) 40 Formation Volume Factor (rb/stb) 1.0204 Initial oil-in-place (stb/acre-feet) 1,003.6 Initial oil-in-place (Mstb) 81,618 Cumulative production (Mstb) 0 Remaining oil-in-place (Mstb) 81,618 Permeability (mD) 800+/- Gas Oil Ratio (scf/bbl) n/a API (degree) 19
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