Connacher Breaks Ground at Oil Sands Project

Connacher O&G announced the completion of construction of its second steam assisted gravity drainage oil sands project at Great Divide in Northeastern Alberta.

Algar has a design steam generation capacity of 30,000 bbl/d, which at its long-term target peak operating steam:oil ratio (SOR) of 3.0, is anticipated to facilitate production of 10,000 bbl/d of bitumen over a project life of more than 25 years. The project was designed to allow for expansion to 34,000 bbl/d of bitumen production in subsequent years.

Major civil work at Algar, including construction of the plant site, access road and well pads, was completed in February 2009. Project field construction and fabrication commenced on July 7, 2009. Drilling of the 17 SAGD well pairs at Algar and concurrent construction of the steam generation facility and oil processing plant were completed in 273 working days, less than the 275 working day target set out by the company. Capital expenses are still being accumulated and won't be final until after commissioning of the project. Connacher anticipates the total construction costs of Algar will be under its announced $375 million budget.

A total of 390 standard loads and an additional 175 large loads of material, skids and component parts were trucked to the Algar site during construction. The project incorporated 1,900,000 kg of structural steel and 280,000 inches of welding on 8,800 spools. Overall, the project had an extremely low spool revision rate of approximately one percent. The project also incorporated 36 vessels, 84 heat exchangers, 52 tanks and 190 pumps. Over 700,000 field and shop man hours of employment were created during Algar's construction, primarily in Canada. At peak construction, 400 workers were employed on site.

Connacher also announced that commissioning of the Algar plant will commence on April 19, 2010. It is anticipated the commissioning process will take up to 30 days and will include tie-in of the three SAGD well pads to the steam generation facility and oil processing plant. Also, the evaporators and all vessels will be tested along with the treating, instrumentation and electrical systems. Commissioning of the steam pipelines and SAGD well pads will follow.

The next step will then be the commencement of sequential injection of steam into Algar's 17 SAGD well pairs. Connacher plans to steam the well pairs for approximately 90 days prior to the initial production of bitumen. The process will be closely monitored to determine the optimum production startup date, based on individual well response. As all wells will not be brought onstream simultaneously, the company anticipates ramping up bitumen production towards design capacity of 10,000 barrels per day by the second half 2011.