Chevron says moving ahead with new oil sands project in Alberta

Chevron says moving ahead with new oil sands project in Alberta

Vancouver (Platts)--5Sep2006

Chevron Canada is moving ahead with the regulatory and technical phases
of a new Alberta oil sands project that could be producing 100,000 b/d within
10 years, a company spokeswoman said Tuesday.

Currently known as the Ells River Assessment Project, the venture
involves drilling 80 to 100 appraisal wells, starting this winter, to "define
the ultimate recovery potential" of leases estimated to have 7.5 billion
barrels of oil in place, Sharon Murphy told Platts.

The drilling will coincide with engineering, processing and other
technical evaluation work, she said.

Western Oil Sands announced August 31 it has exercised its option to take
at least a 20% stake in the project and Shell Canada is considering its
option, Murphy said. Although some aspects of the project are being reviewed
by regulators and a caribou management plan has been approved, a final "go-no
go" decision is not expected until late October or November, she said.

The three companies are partners in the 155,000 b/d Athabasca operation,
with Shell as 60% operator and the other two each holding 20%.

Under the Athabasca agreement, the owners have rights to participate in
any additional leases acquired by any one of the partners within the region.

The Ells River leases cover a combined 75,000 acres and lie 30 miles
northwest of Fort McMurray in northeastern Alberta. Chevron purchased them at
Alberta government land sales in August 2005 and January 2006 for less than
US$75 million.

Chevron's Murphy said the ownership breakdown for Ells River will not be
resolved until Shell decides whether to become a partner. She said Chevron is
not ready to disclose whether the project will be developed in stages or
target initial output of 100,000 b/d.

Western CEO Jim Houck said in a release that his company's participation
in Ells River "directly aligns with our vision to develop large, long-life
hydrocarbon resources" and is a "key stepping stone" as Western pursues a net
production goal of 150,000-200,000 b/d.

Unlike Athabasca, where the bitumen is removed through surface mining,
Ells River is being designed as an in-situ operation, injecting steam to melt
deeply-buried bitumen deposits, enabling them to flow to the surface.

--Gary Park, newsdesk@platts.com

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