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The Globe & Mail: Carbonate: the new oil sands?

Norval Scott, today at 12:27 PM EDT

Interesting presentation from OSUM, a new, private, junior oil sands company. It’s unusual enough for juniors to be involved in the oil sands game as the capital costs are usually prohibitive, but it’s even more unusual for a junior to be in Alberta’s carbonate – which OSUM is.

According to the presentation by CEO Richard Todd and COO Peter Putnam, OSUM may have as much as 1.74 billion barrels of recoverable resources in Saleski and Cold Lake. While development plans are in early stages, it’s targeting pilot applications in both jurisdictions, with commercial development seen post-2012. At Saleski, a project with the potential to produce 75,000 barrels a day is being targeted, while the Marie Lake project (in the Cold Lake region) is seen producing 30,000 b/d. The comopany is currently raising $45-million, although more funds will clearly be needed in the future.

The major caveat is that Saleski is a carbonate play (i.e., the crude is located in carbonates, rather than sands), and no one really knows how they fit into the grand scheme of things yet. Royal Dutch Shell made a big acquisition in the carbonates in the last couple of years, while Husky also owns some carbonate acreage, but how the firms actually plan to extract the crude from the region is a bit of a mystery, as conventional SAGD methods don’t work in carbonate. However, the assumption is that these firms have some idea on how to reach the crude, or why would they spend all that money?

OSUM was actually pretty forthright about how it will go about things saying that underground test methods in Alberta in the late 1970s and 1980s have already proved that crude can be extracted by methods that appear to involve somehow tunnelling wells under the bitumen deposits. Talking about the “mythology” of carbonate extraction, Mr. Putnam said that the methods aren’t as difficult as many believe, with Royal Dutch already involved in projects in Oman, while Rally Energy and Tanganyika Energy, both Canadian firms, are apparently involved in similar projects abroad. “This is not new,” he said.

Even if it’s not, it’s certainly not economically proven – in Canada at any rate. But this is an interesting one to watch going forward – carbonates have the potential to be a big growth area for Alberta if they can be made to work, and OSUM has got in there early. The last time I saw a private oil sands producer present at CAPP, the company – North American Oil Sands – was snapped up for more than $2-billion by Statoil in two years, although it’s obviously far too early to predict similar things for OSUM.

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