Canada: Oh Canada - Significant Developments in Canadian Energy - April 2011

Oil Sands News

1. Suncor reported earnings of $1.028 billion for the first quarter of 2011, representing a 32% increase over the same quarter last year. Oil sands net earnings reached $605 million this quarter, up considerably from the $89 million reported in the first quarter of 2010. Owing to higher oil sands production volumes, higher margins for refined products in downstream refining operations and higher realized prices in upstream operations, Suncor's operating earnings nearly quadrupled in the first quarter of 2011 to $1.478 billion. Suncor's non‐Syncrude oil sands production was reported at 322,100 bpd, up nearly 60% over the same quarter last year.

1. Athabasca Oil Sands Corp filed an application with the Energy and Resources Conservation Board (ERCB) for a 12,000 bpd SAGD facility on its Hangingstone lease located in the Municipality of Wood Buffalo. The estimated peak production capacity of the first phase of the project is in excess of 70,000 bpd of bitumen blend by 2020. The project involves the drilling of 25 horizontal well pairs targeting the Lower Cretaceous McMurray formation. Production is projected to yield approximately 41 million bpd over the 10 year life of the project. Construction is expected to commence in 2012, following which the first steam is anticipated late in 2013. A second 25,000 bpd phase is projected for 2016.

1. MEG Energy outperformed the designed production capacity at its Christina Lake project in the first quarter of 2011. The combined average bitumen production from Phases One and Two was 27,653 bpd, which is approximately 111% of the 25,000 bpd designed production capacity. MEG also boasted a net operating cost of $8.63 per bbl, which represents a 72% decrease compared to the $30.81 per bbl cost during the same quarter of last year. Regulatory approvals have been received and construction is on pace for the 2013 start‐up of the 35,000 bpd Phase Two B. MEG anticipates receiving regulatory approval for a third phase in 2011, which will add an additional 150,000 bpd at Christina Lake and raise the total designed production capacity to 210,000 bpd.

1. Cenovus received ERCB approval for three 40,000 bpd expansion phases at its Christina Lake SAGD facility, in which Cenovus and ConocoPhillips each own 50%. The expansion is projected to increase approved capacity by 122% to 218,000 bpd of bitumen. The three newest phases, known as E, F and G, are expected to be in production in 2014, 2016 and 2017, respectively. Phases A and B are currently producing approximately 18,000 bpd, phase C is undergoing final testing and commissioning, and phase D is expected to be completed and producing in the second quarter of 2013. An additional expansion application, for a 40,000 bpd Phase H, is forthcoming in 2013, which will increase overall production capacity to 258,000 bpd in 2019. Cenovus is also awaiting approval on its application for the 130,000 bpd Narrows Lake facility at Christina Lake, from which first production is expected in 2016.

East Coast News

2. Shoal Point Energy concluded a farmout from Ptarmigan Energy to earn shallow rights on part of Ptarmigan Energy's Exploration Licence 1120 in western Newfoundland by paying Ptarmigan $1.8 million and drilling a well to assess the petroleum potential of the Green Point shale by December 31, 2012. Shoal Point will earn an 80% working interest in the shallow rights and Ptarmigan will retain the remaining 20%. Pursuant to an area of mutual interest agreement, Canadian Imperial has elected to participate in 40% of the 80% interest that Shoal Point acquires. The respective working interest ownership in shallow rights after the well has been drilled be: Shoal Point 48%, Canadian Imperial 32%, and Ptarmigan 20%.

3. FMC Technologies has signed an agreement with Hibernia Management and Development Company to manufacture and supply subsea systems for the Hibernia Southern Extension Project. The Project is an expansion of the Hibernia field, located on the Grand Banks, approximately 315 km southeast of St. John's, Newfoundland and Labrador. FMC Technologies will supply up to six subsea injection trees and wellheads, one manifold and associated control systems. Deliveries of the equipment will commence in the second quarter of 2013.

West Coast News

4. Spectra Energy Transmission announced that it has received NEB approval for its Transmission North expansion project in British Columbia's Peace River District. Both the northern and southern components are expected to be in service by January 1, 2012. The northern component will parallel the existing Fort Nelson mainline and will consist of 24 km of 36‐inch natural gas pipeline. The southern component will entail the construction of the Sunset Creek compressor station and the Stewart Lake Pipeline, a 20 km connecting pipeline between the Fort St. John Mainline and NOVA's Groundbirch Pipeline.

4. Quicksilver has completed construction on the first phase of its Horn River expansion project, and expects the 20‐inch gathering line, which will span 20 miles, to be tied‐in to the Spectra Energy system and operational in May of this year. Quicksilver has completed four natural gas wells in the area that will be capable of producing over 30 mmcfpd once the tie‐in to the Spectra system is complete. The second phase of the project, expected to be completed by the middle of 2014, will require construction of a 36‐inch sales gas line, which will span 70 miles, connecting Quicksilver's proposed CO2 treatment facility and TransCanada's Fortune Creek meter station to TransCanada's Alberta system from B.C.'s Cabin region.

Canadian Arctic News

5. At the Annual General Meeting of the NWT Chamber of Commerce, held in Yellowknife on April 19, 2011, the Deputy Premier and Minister of Industry, Tourism and Investment highlighted the potential for ongoing economic growth in the North West Territories. The Minister emphasized the important economic benefits of large scale infrastructure investments like the Mackenzie Gas Project and Mackenzie Valley Highway, as well as other economic highlights, including the potential associated with the diamond and mineral projects that are currently under consideration, such as the proposed Gahcho Kue mine, Prairie Creek lead zinc mine and the Nechalacho rare earth project.

Alternative Energy

6. The Government of Saskatchewan has approved the construction of the $1.24 billion Boundary Dam Integrated Carbon Capture and Storage Demonstration Project. The project will transform an old generating unit at the Boundary Dam into a producer of reliable and clean electricity and will have the capacity to generate 110MW of electricity. In addition, the project will capture carbon dioxide for enhanced oil recovery operations and sulphur dioxide to be used in the production of sulphuric acid. Construction on the project will begin immediately, with operations expected to commence in 2014.

7. Pattern Energy announced that the 138MW St. Joseph Wind project, the largest wind farm in Canada, has completed construction and is now fully operational. The wind farm will contribute to a regional reduction of more than 350,000 tons of greenhouse gases. Pattern Energy and Manitoba Hydro have entered into a 27‐year power purchase agreement for the sale of energy produced by the project.

8. Solar Power Partners and JCM Capital have signed an agreement with Solar Power Network to provide full project financing for up to 20MW of commercial‐scale rooftop installations throughout south‐western Ontario.

On the Horizon

1. Cenovus is proceeding with three expansion phases at Foster Creek, which will result in a 75% increase in capacity to 210,000 bpd of bitumen. Following debottlenecking procedures, Cenovus expects the steam‐to‐oil ratio (SOR) to drop to approximately 1.9, down from the current SOR of 2.1‐2.2.

1. Cenovus plans to file an update to its Telephone Lake project application in the fourth quarter of 2011. The updated ERCB application will increase the proposed amount of bitumen production for Telephone Lake from 35,000 bpd to 80,000 bpd.

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