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    Clearwater Project

    Clearwater-Phase-I-OverviewClearwater is an innovative, two-phase SAGD bitumen project. The first phase is situated adjoining the Fort McMurray Regional Airport in the Athabasca oil sands region of northeast Alberta. The Clearwater property covers 27.3 sections and comprises the McMurray Formation. AOS holds 100 percent working interest and is the operator.

    Clearwater lies close to existing road infrastructure and provides mostly year-round access. The resource base has been extensively delineated. AOS filed the formal regulatory application for its Phase I project in January 2010 followed by an application update in December 2010.

    Key Facts on the Clearwater Project

    Project type – SAGD, low-pressure recovery model, enhanced with solvent co-injection

    Reservoir – McMurray Formation sands, 45 metres’ average thickness

    Lease – Approximately 32 sections (20,480 hectares) of oil sands leases (100 percent working interest) of which 6 sections are believed to be currently accessible

    Resource delineation – 60 core holes, extensively delineated to date, plus 8 km of 2D seismic and 1.6 km2 of 3D seismic

    GLJ has assessed contingent resources of 373 million barrels in the best estimate case. The assessment reaffirms the magnitude and quality of the bitumen resources attributed to the Clearwater property and updates and supersedes all previous reports assigning probable reserves and contingent resources to the Company’s Clearwater Property.

    Reservoir quality –

    • Bitumen pay thickness – 20-55 metres net
    • Porosity – Average 35 percent
    • Bitumen saturation – Average 80 percent
    • Shale cap – Continuous mudstone
    • Bitumen viscosity – 7-10° API

    Phase I project footprint – 10.3 hectares

    Phase I main facilities – One steam boiler, one diluent fractionator, six SAGD well-pairs, observation wells, water source wells and pipelines, bitumen/diluent blending, temporary bitumen storage tanks, electricity and natural gas service, office/control room building, vapour recovery system, extensive tiltmeter network, various monitoring and observation sensors and systems. Central processing facility capable of generating 1,113 m3/d of steam and processing 4,350 bpd of bitumen production.

    Planned peak production –

    • Phase I – 4,350 bpd with 10-15-year operating life
    • Phase II – 15,000-25,000 bpd with 25-30-year operating life

    Capital spending -

    • Through regulatory approval – Approx. $50 million
    • Phase I capital requirement – Approx. $150 million
    • Phase II capital requirement – Approx. $1 billion for 25,000 bpd

    Development Strategy

    AOS has chosen a phased approach to Clearwater development. The first phase will demonstrate the safety and commerciality of Clearwater bitumen production and the larger Phase II will fully develop the bitumen resource.

    The key goal of the Clearwater Phase I Project is to demonstrate commercial viability using the chosen operating design as applied to this reservoir. Demonstrating commercial viability will include verifying key design parameters, including the productivity gain and SOR reduction achieved through solvent co-injection, plus the addition of basement well production, as well as other features.

    AOS has achieved the following results as of fall 2011:

    • Assembled the Clearwater leases;
    • Conducted three rounds of winter delineation drilling;
    • Acquired (“shot”) and interpreted 2D and 3D seismic data;
    • Evaluated and substantiated the resource;
    • Designed and conducted initial engineering on the SAGD well plan and surface facilities;
    • Prepared and submitted the regulatory application and project update;
    • Assembled a network of qualified technical consultants and sub-contractors; and
    • Consulted with stakeholders, including the Fort McMurray Airport Authority (FMAA) as well as local residents, businesses and aboriginal groups, a process that will continue throughout the life of the project.

    Phase I

    Clearwater-Phase-I-projectPhase I will consist of an initial six SLP-SAGD well-pairs (injectors and producers), drilled from a common pad adjoining the surface facilities. The wells have planned horizontal legs of 600 metres’ length and lateral spacing of 75 metres between wellbores.

    Facilities will consist of one steam boiler, one diluent fractionator, six SLP-SAGD well-pairs, observation wells, water source wells and lines, bitumen/diluent blending, temporary bitumen storage tanks, electricity and natural gas service, office/control room building, vapour recovery system, extensive tiltmeter array, and various other monitoring and observation systems.

    The plant site and well pads will have a very small surface footprint. They will cover a fenced area of only 10.32 hectares, a tiny fraction of the Clearwater lease area of 8,288 hectares. Of this small fenced area, the majority will remain undeveloped.

    Phase I will include solvent co-injection, which will facilitate low-pressure SAGD operations, creating a process AOS calls solvent-low-pressure or SLP-SAGD. This process will improve productivity and reduce the SOR to maximize operating efficiencies and minimize the project’s physical and environmental footprint.

    Phase I will have a planned production rate of 4,350 bpd of bitumen (approximately 725 bpd per producing well). The project has an expected capital requirement of $150 million, including facilities, horizontal wells and other project costs. This represents a capital cost of only $40,000 per installed barrel of daily production capacity at 4,350 bpd.

    Please click here for key facts on the Clearwater Project.

    Phase II – Commercial Project

    Clearwater Phase II has potential production of 15,000-25,000 bpd. Production maintenance wells would be drilled to offset normal production declines after peak production is achieved. Basement wells would also be drilled.

    The Phase II plant site could be located on the eastern side of the Company’s Clearwater lands near the current CN Rail terminal, farther from the airport than the Phase I plant. The Phase II facilities would be largely scaled-up versions of the Phase I plant design, with water recycling and similar safety and environmental protection systems as Phase I. There will also be additional well pads and satellite facilities. The overall surface footprint of facilities and well pads will remain small.

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