Commercial SAGD Drilling Begins at Long Lake Project

Joint-venture partners Nexen and OPTI Canada have started the commercial steam-assisted-gravity-drainage (SAGD) drilling program for the Long Lake integrated oil sands project in Canada.

Sixty-five horizontal well pairs will be drilled over the next 18 months, with steam-injection expected late in 2006. These wells, together with the three horizontal well pairs from the Long Lake pilot, will deliver up to 72,000 barrels per day of bitumen for upgrading onsite.

"The SAGD pilot has been operating now for over a year, helping us to better understand this reservoir," commented Charlie Fischer, Nexen's President and Chief Executive Officer. "Production from the SAGD pilot is currently 1,800 bbls/d, and is expected to reach 2,500 bbls/d over the next few months."

Project engineering and procurement are also progressing as planned. Approximately 40% of total project engineering is complete. More than 80% of the engineering will be completed prior to the start of above-ground construction scheduled for early 2005. Over 90% of the major SAGD equipment and 75% of the major upgrader equipment has been ordered. The equipment costs have been in-line with our expectations.

"Total project costs and schedules remain on track," said Sid Dykstra, President and Chief Executive Officer of OPTI Canada. "The start of commercial drilling is another significant milestone in the development of the Long Lake project."

In addition to drilling, current site activities include final site clearing and preparation, installation of deep underground facilities, preparation of tank bases, and building of camp facilities. About 850 people are currently working full-time on the project, with onsite labor expected to peak at about 2,000 workers in 2006.