Nexen Sees Positive Results at Long Lake Following Turnaround

Nexen continues to see positive results at Long Lake following the successful completion of the turnaround program in September.


Long Lake Project Update

At Long Lake, we have achieved a number of major milestones over the past year. Our gasification process is working as designed, creating a low cost fuel source which reduces our need to purchase natural gas for operations. Once the project is fully ramped up, it generates a significant margin advantage over our peers and we maintain this advantage even at current gas prices.

The upgrader is fully operational. We are approaching design yields and we have successfully produced over 1.5 million barrels of the highest quality synthetic crude in North America. Upgrader run times are increasing and in November, improved reliability allowed us to process 95% of our bitumen production.

Now that all components of the upgrader are operating as planned, we are focused on maximizing bitumen throughput. We will achieve this by increasing production volumes from our reservoir and by purchasing bitumen from third-parties to enhance returns.

The reservoir is responding to consistent steaming. Following a turnaround completed in September, the reliability of our water treating systems has improved substantially and currently, steam injection rates are at an all-time high of approximately 100,000 bbls/d. We are injecting steam into over 70 well pairs with 50 on production and the remainder circulating steam in advance of becoming producers. This is the highest number of wells that have received consistent steam to date. Prior to the turnaround, steam limitations only allowed us to inject steam consistently into approximately 35 well pairs.

Bitumen production levels are responding to the increased steam volumes and gross production is averaging approximately 17,000 bbls/d. As we start to circulate steam in more wells, our all-in steam-to-oil ratio (SOR) will remain high and is currently approximately 6 with about 20 wells receiving steam but not yet producing bitumen. The SOR of our producing wells is approximately 4.5 and trending down. With the ongoing installation of electric submersible pumps (ESPs), we are seeing improvements in our SORs. We continue to expect a long term SOR of 3 over the life of the project.


In addition to the continued installation of ESPs, our capital investment program in the coming year includes the drilling of two sustaining well pads in accordance with our full field resource development plan. These pads will be available to come on stream starting in 2012.

"We are still in the SAGD ramp up phase and are pleased with post-turnaround performance," said Marvin Romanow, Nexen's President and Chief Executive Officer. "Steaming reliability has improved and this is leading to higher bitumen production. We are confident that we will ramp up to full rates and demonstrate the significant value this project will deliver to our shareholders."