Synenco Updates Northern Lights Cost Estimate

Synenco Energy Inc. today released an updated capital cost estimate of $4.4 billion for the upstream mining and extraction portion of the Northern Lights oil sands project.

The capital cost estimate reflects a modularized construction approach for the extraction plant and associated facilities, which are anticipated to be sourced primarily from fabricators in Asia. The modules will be designed to be up to 2,000 tons, or approximately 12 times the size of modules traditionally fabricated for oil sands plants. The estimate is in constant 2006 dollars, and is estimated by management to carry a precision level of + 30 / - 10 percent.

"There is no question that costs affecting capital-intensive oil sands projects have changed dramatically in just a few months -- largely due to resource shortages -- and our project's cost estimates have also risen," said President and Chief Operating Officer Todd Newton. "Our construction approach should provide relief from the current cost environment, while recruiting the vast capabilities of our partner, Sinopec.

"Modules will be fabricated in Asia, shipped to northern Alberta, and assembled at site. This approach will reduce our field construction labor needs in a time of limited supply and improve both our cost and schedule certainty."

The upstream portion of the Northern Lights project includes mining and bitumen extraction operations. The best estimate of the resource contained on Northern Lights project lands now is 1.673 billion barrels of bitumen in place (1.492 billion - 2005). The new independent appraisal, announced in October, represents an approximate 12-percent year-over-year increase in the best estimate. Using a recovery factor of 80 percent, management considers there are 1.3 billion barrels of recoverable resource, which will result in production for approximately 30 years.

Synenco plans to release a revised capital expenditure estimate for the downstream portion of Northern Lights in 2007 at the completion of current engineering and planning efforts. "We firmly believe that an integrated business model, with both bitumen production and upgrading, is the most robust and secure," said Mr. Newton.

The Northern Lights project consists of an oil sands mining and bitumen extraction project to be established about 100 kilometers northeast of Fort McMurray, Alberta, and a heavy oil upgrader project to be situated in Sturgeon County near Edmonton. Separate regulatory applications for each segment of the project were filed with the Alberta Energy and Utilities Board and Alberta Environment during 2006.