Enerplus Defers Further Development at Kirby Oil Sands Project
Enerplus is deferring further development of the Kirby Oil Sands project ("Kirby"). We will be completing several key activities to wrap up our current efforts and position the project to be re-evaluated and potentially reinitiated at a later date. While we believe there is long-term value in the Kirby project, the current cost structures, commodity price environment and our cost of capital do not offer a sufficient economic return for additional investment toward project sanctioning at this time.
The Kirby Oil Sands project is a 100% owned in-situ development that was acquired in early 2007. Delineation work to date has increased the original resource estimates by greater than 70% to over 400 million barrels of best estimate contingent resources. Application was filed in September of 2008 for the first phase of the development, a 10,000 bbl/day steam assisted gravity draining project. Enerplus has not booked any reserve volumes associated with the Kirby lease.
Our original 2009 activities were directed at providing additional information to regulators and stakeholders to advance our application, completing a seismic program which began in late 2008 and advancing detailed engineering. We plan to complete an updated resource assessment this summer based on new seismic data and to complete the regulatory application process by this fall as originally planned. We will not, however, continue the advance engineering work which would have led to a sanctioning decision later in 2009.
As we had already significantly reduced our spending plans on Kirby for 2009 to $25 million, we expect a further modest decrease in the order of $5 million this year. We expect to employ a majority of the existing oil sands staff on wrap up activities over the next several months and begin redeploying them into other areas of our business.
We will continue to monitor economic, regulatory, market and technical developments which impact oil sands development and will revisit our plans for Kirby as circumstances warrant.