Oilsands Quest Preps for Next Exploration Phase in Saskatchewan & Alberta

Oilsands Quest is ramping up exploration activities on its oil sands permits in northwestern Saskatchewan following the receipt of government approval of three of the four programs planned for its next phase of operations. The company received approval of its applications for permits to drill 97 exploratory holes, to undertake electrical resistance tomography (ERT) surveys and to conduct road maintenance activities; all of these permits expire March 31, 2008. The company has not yet received approval of the application for its fourth program, an extensive seismic survey.

The drilling permit allows Oilsands Quest to commence drilling operations before freeze-up. Two drilling rigs will be utilized for this purpose and are now being mobilized; they are expected to be on site and ready to begin drilling by mid-September. Mobilization of the services, personnel and equipment required to support drilling operations and other exploration activities is already underway.

Approvals for extensive 2-D and 3-D seismic programs on Oilsands Quest's adjacent lands in Alberta have also been received, and these programs are currently underway.

Drilling program combines delineation and exploratory drilling

The Saskatchewan drilling permit is based on drilling up to 70 holes in the Axe Lake area and another 27 holes along Oilsands Quest's main access road. The holes in the heart of the Axe Lake area are intended to further delineate the Axe Lake discovery and to obtain detailed information for potential field pilot locations. The holes to be drilled along the access road will test structural targets identified by seismic surveys conducted during the winter 2006/07-exploration program.

In total, eight drilling rigs have been committed for drilling operations between now and the end of March 2008. The winter 2007/08 drilling program is not expected to begin until late November or early December and will be dependent on ideal winter drilling conditions. Oilsands Quest plans to submit an application to expand the current drilling program.

"Our upcoming program represents the next chapter in the development of Axe Lake," said Errin Kimball, Oilsands Quest's Vice President of Exploration.

"We are confident that delineation drilling in the Axe Lake area will increase our knowledge of the reservoir as we assess its potential production capability. For exploration in other areas of our Saskatchewan permits, we will use a combination of both 2-D and 3-D seismic and ERT to optimize exploration drilling."

The company plans to use the same exploration strategy on its adjoining permits in Alberta, combining seismic, ERT and drilling to reduce drilling risk and further accelerate timelines for exploration and field production testing.

ERT surveys to help qualify targets identified by seismic

The purpose of the ERT surveys is to measure the resistivity of underground structures identified by seismic surveys in order to determine if the structures contain bitumen or water; they are conducted using small all-terrain vehicles. The permit to conduct ERT surveys is based on two stages: the first involves two test surveys of 4.7 line kilometers each, and the second stage covers up to 100 line kilometers. Interpretation of the results is then correlated with other exploration data in order to form a basis for the selection of exploratory drilling locations. The first stage of the ERT program has already begun.

Other activities related to gearing up for exploration program

The third Saskatchewan permit approved for immediate implementation is related to road maintenance, including the extraction of sand and gravel to maintain exploration roads and trails. Permits of this nature are applied for on a program-by-program basis to support other operations on the company's permit lands. This permit is also tied to the traditional end of the winter drilling season and expires March 31, 2008.

In Alberta, the 2-D and 3-D seismic programs will be conducted on lands adjacent to the company's Axe Lake Discovery in Saskatchewan. Approximately 50 kilometers of 2-D seismic will be undertaken to expand on the seismic program carried out in March 2007. Approximately 500 kilometers of 3-D seismic will focus on targets identified in the March 2007 seismic program. These permits are tied to the end of the winter drilling season and expire April 30, 2008.

The company's base camp, which can house approximately 100 people, has remained open and operational since the end of the last winter drilling program to accommodate maintenance crews and personnel involved in fieldwork for baseline environmental studies. This fall, Oilsands Quest plans to add another dormitory unit to the base camp, which will increase its capacity to approximately 150. The company's other existing camp facility in Saskatchewan, referred to as south camp, will also be utilized this winter; it can house up to 70 people.

A new camp, equivalent in size to the Saskatchewan base camp, will be established in Alberta to support the company's exploration activities there.