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Canada is one of the few places in the world where oil production is expected to increase over the next 10 years largely due to the development of the vast oil sands reserves. Oil sands projects, which have a long life and typically flat production profiles, are ideal assets for income trusts.
We first became involved in the oil sands in 2002 through a 16% working interest acquisition of the Joslyn lease from Deer Creek Energy Ltd. In 2005 Deer Creek was acquired by a wholly-owned subsidiary of Total S.A. ('Total'), a major international oil and gas company experienced in the extraction and refining of heavy oil. We believe the participation of Total will enhance the development of Joslyn through their expertise and strong financial backing.
In a transaction subsequent to the year end, we sold a 1% working interest in Joslyn in exchange for equity in Laricina Energy Ltd. ('Laricina'), a new private oil sands focused company led by the former Chief Executive Officer of Deer Creek Energy. Included in the sale is an area of mutual interest agreement ('AMI') which has been designed to jointly pursue additional in-situ oil sand ventures. This partnership will allow us to accelerate additional oil sands development outside of Joslyn, support our efforts to attract and build a focused oil sands area team and leverage off of the expertise of Laricina. Our focus will be on incremental SAGD projects although as the Joslyn mine develops, it has the potential to be a significant non-operated position for us. Following the sale to Laricina, Enerplus now has a 15% working interest in the Joslyn lease.
Total's current plans for Joslyn are as follows:
| Sanctioned Projects |
Gross Production
/ Throughput (bbls/day) |
Net Production /
Throughput (bbls/day) |
Net Future Development
Capital ($millions) |
Start Up (1) |
Full Production /
Throughput |
| SAGD Phase I (Pilot) |
200 |
30 |
|
Q2 2004 |
2005 |
| SAGD Phase II |
10,000 |
1,500 |
34 |
Q1 2006 |
2009 |
| |
|
|
|
|
|
| Future Development Projects |
|
|
|
|
|
| SAGD Phase III A&B |
30,000 |
4,500 |
167 |
2008 |
2011 |
| Mine Phase I |
100,000 |
15,000 |
466 |
2010 |
2014 |
| Mine Phase II |
100,000 |
15,000 |
466 |
2016 |
2020 |
| Upgrader |
n/a |
n/a |
n/a |
2013 |
2014 |
(1) Start up for SAGD refers to initial steaming. Start up for mining refers
to initial extraction.
2005 Activities
To date we have successfully executed a single well pair pilot, initiated our first commercial SAGD project, and advanced the mine to the point where we expect to be in a position to record probable bitumen reserves in 2006. We are pleased to report a number of accomplishments in 2005:
Invested approximately $33 million in the asset in 2005, with $30.6 million directed to SAGD and $2.6 million directed to advancing the mine and general corporate and administrative costs.
Drilled 271 gross delineation wells which increased the total database to more than 800 and supported the addition of 5.4 million barrels of oil net to Enerplus to the Joslyn project.
Began construction of the 62 kilometre, 40,000 bbl/day Joslyn pipeline.
The Phase I SAGD facility and well pair produced approximately 200 bbls/day and is providing useful information for the operation of SAGD Phase II.
Purchased 4.5 gross sections of land adjacent to our existing Joslyn acreage. Although no reserves were recorded for this purchase due to the lack of core hole drilling to date, 482 million gross barrels of in-place bitumen resource potential, 72 million barrels net to us, exist on the lease according to an independent assessment.
Initiated a pilot to explore the potential of burning emulsified bitumen as an alternative fuel to natural gas. This process has the potential to reduce the use of natural gas, which accounts for 70% of the operating costs for a SAGD project.
Continued to develop the 10,000 bbl/day SAGD Phase II on schedule. At the end of 2005, 9 of the well pairs have been completed and initial steam injection is planned for the first quarter of 2006.
2006 Outlook
We will continue to develop the Joslyn lease in 2006 and expect to:
- Invest $31 million, including $6 million to advance the mine project through additional core hole drilling, regulatory approval process and engineering design work.
- Complete Phase II drilling and finalize construction of the water treatment and central facilities. First steam production expected in the first quarter of 2006, and first production by May. Gross production should average 2,250 BOE/day over the year and exit at 6,300 BOE/day.
- Receive regulatory approval for the 15,000 bbl/day Phase IIIA in the first half of 2006.
- Complete the 300 well core hole program.
- Complete engineering, obtain regulatory approval and conduct mine pilot plant test.
- Complete construction of the sales pipeline in the first half of 2006.
- Decommission the Phase I facility.
- Expand our oil sands opportunities through our partnership with Laricina.
The Joslyn project is a unique development project within the trust sector as we are the only conventional oil and gas trust to have line-of-sight to commercial projects in either SAGD or mining.
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