Grizzly Oil Sands ULC submitted an application to the Alberta Energy Resources Conservation Board and Alberta Environment for the development of an 11,300 barrel per day ("bblpd") oil sands project at Algar Lake. The project is expected to operate at an average capacity of 10,000 bblpd over a design life of 30 years. Grizzly's Algar Lake Project will utilize a proven method of in-situ extraction known as steam-assisted gravity drainage to exploit the resource.
Grizzly is seeking approval for the Stage 1 development of its Algar Lake Project, consisting of two plant phases and 40 well pairs on four well pads. Each plant phase is designed to operate at an average capacity of 5,000 bblpd. Upon approval, Grizzly intends to construct the first phase consisting of one modular central processing facility ("CPF"), ten well pairs on one well pad, and associated roads and pipelines. As proposed, the second plant phase, to be developed two years subsequent to approval, will include a second modular CPF and an additional ten well pairs on one well pad. Each phase is estimated to carry an initial gross capital cost of approximately $120 million. In order to maintain consistent production, an additional pad will be required for each phase every five years at an estimated gross cost of $35 million per pad.
Over the life of the entire Algar Lake Project, Grizzly expects to drill approximately 100 well pairs from ten well pads. The production life for each individual well pair is estimated to be approximately five to seven years. Third party engineers McDaniel & Associates estimate the Algar Lake Project will ultimately recover approximately 89 million barrels of bitumen.
Grizzly expects receipt of approvals from the ERCB and AENV for the Algar Lake Project within 12 to 18 months of application submission. Following approval, Grizzly anticipates the period leading up to first production to be approximately 18 months.
With the submission of this application, Grizzly expects that the majority of the contingent resource assigned to the Algar Lake property will be reclassified as probable reserves by their independent engineering firm, McDaniel & Associates. The project application is a complex and encompassing document that addresses the requirements that must be met for approval of a commercial project of this size by the Alberta government. These requirements include:
Grizzly's Algar Lake Project was chosen as Grizzly's first oil sands development project due to its clean pay interval, low geologic risk and proximity to established infrastructure. The Algar Lake Project area is located approximately 45 kilometers southwest of Fort McMurray and 10 kilometers west of Highway 63, near established and producing oil sands developments at JACOS Hangingstone and Connacher Great Divide. Grizzly discovered the Algar Lake Project area during the 2007-2008 winter drilling season and has subsequently drilled a total of 61 core holes and shot 3-D seismic on the acreage.
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