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Financial Post (Canada): Western to join with Chevron on Ells project: ‘A key stepping stone’

Published: Sep 02, 2006

CALGARY – Western Oil Sands Inc. said it will partner with Chevron Corp. in the Ells River oilsands project.

The company, already a partner with the San Ramon, Calif.-based multinational in the Athabasca Oil Sands Project led by Shell Canada Ltd., said it has exercised its option to participate to at least 20% in Ells River, which will use in-situ technology.

“Our participation in this project directly aligns with our vision to develop large, long-life hydrocarbon resources,” said Jim Houck, president and chief executive of Western.

“This project is a key stepping stone for Western as we continue to build our land and resource base to reach potential production in the 150,000 to 200,000 barrels per day range,” Mr. Houck said.

The move renews Western’s focus on the oilsands after it angered shareholders with its recent foray into Iraq, seen as a departure from its business model.

In May, Western Oil Sands said it made a commitment to spend US$45-million in the next four years to look for oil in Iraq’s northern region of Kurdistan. Western Oil Sands’ stock ran up in the past few days on speculation activist investors may be trying to force a change in management or a sale of the company.

Chevron purchased the oilsands leases in Alberta Crown land sales in August last year and last January for less than US$75-million. The oil company said it plans to spend billions of dollars to produce more than 100,000 barrels a day by 2015.

Ells River is located approximately 50 kilometres northwest of Fort McMurray in the Athabasca oilsands region and is estimated to hold 7.5 billion barrels of oil.

An 80- to 100-well appraisal drilling program is expected to start in the 2006/2007 winter season, and will continue parallel to engineering, processing and other technical evaluation work, Western Oil Sands said.

Western Oil Sands had the option to participate as part of a joint venture relationship with Chevron and Shell in which the three companies agreed to offer each other the opportunity to extend their partnership in oilsands ventures within a certain area.

Shell Canada has the same opportunity and is considering its option, said Chevron spokeswoman Sharon Murphy.

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