Nexen gets OK to up Long Lake drilling
Addition needed to boost low performer
Nexen Inc. said Monday it has the regulatory approvals it needs to continue drilling new thermal wells to boost production from its perennially underperforming Long Lake oilsands project.
In a news release, the Calgary company said the northern Alberta facility averaged 34,500 barrels per day of bitumen output in the first quarter, up 10 per cent from the fourth quarter but well below half of the 72,000-bpd capacity it aimed for, when started three years ago.
It said it had started steaming a 12th well pad (cluster of wells) and had received provincial approvals to proceed with pads 14 and 15 at Long Lake and the first pad at Kinosis, a lease 12 kilometres to the south.
“Achieving first steam at Pad 12 and securing approvals for the remainder of our wells are key steps in our strategy to increase bitumen production and fill the upgrader,” said Kevin Reinhart, Nexen’s interim president and chief executive, in a statement.
“Obtaining regulatory approval allows us to commence drilling the wells this summer.”
Nexen reported that Pad 11, its most recent addition, has been producing 5,700 bpd of bitumen on an expected range of 4,000 to 8,000 bpd.
It said Pad 11 takes it to a total of 90 well-pairs and it will add 29 more via pads 12 to 15 and another 29 with Kinosis 1A.
The update was largely as expected and analysts said that while Pad 11’s ramp up is positive, it seems unlikely that Long Lake can reach its capacity before 2015.
Because Nexen’s upgrading process consumes part of the bitumen barrel, its actual output of synthetic crude was about 26,000 bpd from 34,500 bpd of bitumen, said spokes-
Obtaining regulatory approval allows us to commence drilling the wells this summer.
KEVIN REINHART, OF NEXEN
man Davis Sheremata.
He said more information on when the upgrader will be filled to capacity will be available when first-quarter results are released next week.
At capacity, Long Lake would produce about 60,000 bpd of synthetic crude from 72,000 bpd of bitumen.
Nexen stock closed at $18.46, up 16 cents, on Monday. Its 52-week high of $25.47 was registered last May.
Steaming on Pad 12 started in March and production is expected to begin this summer, the company said. Steam injection at Pad 13 is expected to commence mid-year with production by year-end.
Production from these pads is expected to ramp up to full rates over an 18-24 month period.
Drilling of the well pairs is expected to start on pads 14, 15 and Kinosis 1A later this year. Steam injection is expected on pads 14 and 15 in the second half of 2013, with Kinosis 1A following by mid-year 2014.
Nexen warned that pads 14 and 15 will use shorter well lengths, resulting in a lower production range on these pads.
CNOOC Canada Ltd., a wholly-owned subsidiary of China national off shore oil Company, has a 35 per cent interest in the project.
Long Lake uses steamassisted gravity drainage, where steam is injected through a horizontal well to melt the sticky bitumen and allow it to flow to a parallel producing well.