"Our 2006 capital program is in-line with our Project plan approved in early 2004, and enables OPTI to continue to move Phase 1 of the Project forward, as scheduled, towards first steam in late 2006 and Upgrader start-up in mid-2007," said Sid Dykstra, President and Chief Executive Officer of OPTI. "At the same time, we continue to invest in future expansions to further develop growth opportunities for our Company and our shareholders."
Long Lake Project Update: First Steam Expected in Late 2006
The Project remains on-schedule for first steam to be injected into the reservoir in late 2006, in preparation for Upgrader start-up in mid-2007. The Project remains on-budget with approximately 65 percent of the Project's total costs committed. Importantly, these accomplishments were achieved while maintaining an excellent safety record on the Project to date. Access to skilled labour and labour productivity remain key factors in cost and schedule performance. The ramp-up of labour in the module facilities has progressed slower than anticipated; however, the module labour force is now at approximately 90 percent of planned levels. This has delayed module fabrication progress but it is not expected to impact the overall Project schedule. The ramp-up of labour on-site has occurred as expected, with peak on-site labour requirements forecast to occur in the first half of 2006. To aid in alleviating supply pressures on the availability and associated rising costs of labour, the Owners are collaborating with our key contractors Ledcor Inc. and Flint Infrastructure Inc. to identify and hire alternate sources of labour. To facilitate peak labour productivity on-site, engineering on the project is essentially complete, material deliveries are on-track and work plans are in place. Labour productivity is being actively monitored by the Owners and additional information will be available once sufficient construction progress has been made on-site.
SAGD Progress -------------All 156 wells (78 well pairs) have been drilled on the commercial Project, ahead of schedule and under budget. To date, lean zones have been encountered in only four wells with reservoir quality continuing to meet expectations. Work is progressing on the completion and tie-in of these commercial wells in anticipation of first steam late in 2006.
The majority of major equipment for the steam assisted gravity drainage ("SAGD") portion of the Project has been delivered to site. Construction is continuing on key components of the SAGD facilities including hot lime softeners, steam generation, oil treatment and power cogeneration.
As previously announced, the Owners are continuing to evaluate opportunities to de-bottleneck or expand the water treatment and steam generation facilities to ensure adequate bitumen supply to the Upgrader. SAGD facilities are currently designed for steam capacity to support 72,000 bbl/d of bitumen production at a steam oil ratio ("SOR") of up to 2.5. To allow for increased flexibility to meet peak steam requirements and to create capacity for future phases of growth, during the fourth quarter a study was conducted to evaluate increasing steam capacity by 30 percent to support a peak SOR of up to 3.3. This option would require expanded fluid handling facilities as well as additional steam generators, with initial cost estimates of up to $250 million (gross), or $125 million net to OPTI. Additional engineering to provide further definition on the cost of this option is in progress, and a final decision regarding the addition of steam generation capacity is expected to be made in the first quarter of 2006.
Upgrader Progress -----------------Approximately 50 percent of the Project equipment for the Upgrader has been received. In late November, the ship commissioned by the Long Lake project to collect equipment specifically manufactured for the Upgrader from countries around the world including Japan, Malaysia, India, Italy and the Netherlands arrived on-schedule in Duluth, Minn. The cargo has been loaded onto railcars and is currently en route to the Project. Construction activity continues to advance on the Upgrader. Pipe spooling and module fabrication continues in seven shops and is approaching peak activity levels. The last hydrocracker super module was set on-site in October. Delivery of the OrCrude(TM) and Utility and Offsite super modules is in progress. By the end of 2005, all concrete foundations required to facilitate the continued delivery and setting of major equipment will be in place.
SAGD Pilot ----------
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