Oilsands Quest to Accelerate Axe Lake Development

Oilsands Quest Inc. on Monday announced the company's plans to accelerate timelines for development of the Axe Lake discovery on its oil sands exploration permits in Saskatchewan. Although commerciality of Axe Lake bitumen resources has not yet been determined, the company's management team believes that, based on drilling results and determination of reservoir characteristics to date, Axe Lake will be suited to in situ recovery.

"We are investing now in activities that will create value and aggressive timelines for development," said Christopher H. Hopkins, President and CEO of Oilsands Quest. "We are evaluating reservoir characteristics to determine the best technologies for production and to help identify potential operating partners." The company expects to be in a position to begin discussing potential joint venture partnerships in 2008.

Potential for In situ Recovery

Oilsands Quest has a number of initiatives underway to evaluate in situ recovery alternatives. The company has engaged industry-leading technical specialists to undertake studies specific to the reservoir characteristics of the Axe Lake Discovery. It is also participating in collaborative research programs being conducted by major research facilities in Alberta and Saskatchewan. In addition, the company has been expanding its own staff and facilities as it moves toward development.

"We have assembled a high-caliber team with the experience and expertise to take the company forward," said Hopkins. "Our overall target is commercialization; however, at the same time, we will continue to conduct exploration on our Saskatchewan permits and our adjacent permits in Alberta."

Planned Activities and Preliminary Timelines

Following is an overview of key activities planned for the upcoming 12 to 18 months, along with an indication of preliminary timelines:

  • Evaluate drilling data and perform laboratory studies for bitumen recovery (underway)
  • Conduct environmental programs to facilitate regulatory approvals (underway)
  • Develop engineering timelines to pilot plant stage (underway)
  • Conduct economic feasibility and risk assessment studies (underway)
  • Undertake reservoir modeling (Q3/2007)
  • Drill test wells to confirm laboratory studies (2008, subject to approvals)
  • Initiate joint venture partnership negotiations for Axe Lake development (2008)
  • Continue exploration in Saskatchewan and adjacent Alberta townships (ongoing).

In addition to the above activities and a stepped-up exploration program, Oilsands Quest will continue to work closely with communities in the northwest region of Saskatchewan and with all stakeholders to gain support for future development.

Axe Lake Resource Characteristics

Although studies of the bitumen characteristics at Axe Lake are ongoing, the following characteristics are indicated to this point in time:

  • Continuity of thick oil sands over 36 sections (36 square miles)
  • McMurray formation up to 45 meters thick (150 feet) with oil sands thickness up to 30 meters (100 feet)
  • Coarse-grained sands with very low fines content, which results in very good porosity (36% to 39%)
  • Oil saturation as high as 92%, averaging in excess of 80%
  • Excellent permeability, both horizontal and vertical (greater than 5 Darcies)
  • No shale inter-bedding, no top or bottom water
  • Average depth of 185 to 200 meters (607 to 656 feet).

Axe Lake & In situ Recovery

Axe Lake is considered suitable for in situ recovery based on the resource characteristics, including the following:

  • Resource is located at an appropriate depth.
  • High permeability and porosity characteristics could result in high recovery factors.
  • Hot water, steam and/or solvent flood recovery processes are expected to be efficient at relatively low temperatures and pressures.
  • Clay-rich layer overlying resource is expected to provide an effective seal for anticipated recovery processes.

Leading technical firms have been contracted to undertake bitumen recovery studies and to design field tests. Oilsands Quest is actively examining a variety of recovery techniques with the goal of identifying the most economic, energy-efficient, high-yield, "green" technologies suitable for the bitumen resource at Axe Lake.

Oilsands Quest Inc. is involved in oil sands exploration focused primarily on its oil sands exploration permits in Saskatchewan and Alberta. The company has initiated pre-commercialization studies for its Axe Lake Discovery, placing it at the forefront of the development of an oil sands industry in the province of Saskatchewan.