MEG Energy’s Christina Lake oil sands expansion gets green light

A Calgary-based oilsands development company is moving forward with a billion dollar plan to expand production at its Christina Lake facilities in Alberta.

A Calgary-based oil sands development company is moving forward with a billion-dollar plan to expand production at its Christina Lake facilities in Alberta.

“With the completion and approval of the final cost estimate of Phase 2B, we are commencing horizontal drilling next week and initiating facilities construction in 2011,” said MEG Energy Corp. chairman, president and CEO Bill McCaffrey. “Phase 2B is an important step in implementing our strategy of having production capability of 260,000 barrels per day by 2020.”

The board of directors of MEG Energy Corporation recently approved the company’s budget and capital investment plans for 2011.

This plan includes the $1.4 billion cost estimate for the 35,000 barrels per day Phase 2B expansion at Christina Lake.

By the end of 2010, about $200 million will be invested in engineering, site preparation and horizontal drilling for Christina Lake Phase 2B.

The remaining $1.2 billion is to be invested over the next two to three years, including about $450 million in 2011.

The 2011 budget includes $80 to $90 million for core drilling and seismic programs at Christina Lake, Surmont and Growth Properties.

MEG has budgeted about $200 million for key infrastructure, such as operations staff housing, a construction camp, pumping stations on the Access Pipeline, and preliminary engineering for future phases of development.

During the first nine months of 2010, MEG drilled 66 holes and two observation wells to assist in the determination of Phase 2B horizontal wells and further delineate the Christina Lake lands.

Facilities investment in this period was directed towards detailed engineering and the purchase of major equipment, installation of electric submersible pumps, and maintenance of the Phase 2 facility.

Detailed engineering of Phase 2B is about 25 per cent complete and capital commitments for 70 per cent of all equipment orders are in place.

The Phase 2B plant would be located adjacent to the existing Phase 1 and 2 processing facilities and is designed to increase the production capacity of the central processing facility to 60 000 b/d.

MEG owns 537,600 acres of oilsands leases and is developing its resources in multiple phases to minimize capital investment risk and benefits from commercial operations at Christina Lake.

The first two production phases at the Christina Lake Project, Phase 1 and Phase 2, started production in 2008 and 2009 and have a combined design production capacity of 25,000 bbls/d.

Once Phase 2B is complete, MEG’s combined production capacity at the Christina Lake project is expected to reach 60,000 bbls/d.

Phase 3 will also be a phased development and involves the construction of two additional central processing facilities, steam assisted gravity drainage wells and additional infrastructure.