Oilsands Quest leads the way in Saskatchewan’s oilsands

Vancouver – Not all of the Fort McMurray formation’s oilsands lie within the borders of Alberta. Oilsands Quest (BQI-X) is proving that the ground in Saskatchewan, about 100 km to the east of the city of Fort McMurray, holds significant amounts of bitumen.

Though Saskatchewan’s oilsands are not nearly as vast as Alberta’s they are lucrative enough to attract serious cash. Oilsands Quest’s recent US$29.8 million private placement, 35.1 million units at US85¢, adds to more than US$300 million it has drummed up to advance an oilsands project in a province that only began to generate bitumen buzz in the last couple of years.

Straddling the Alberta-Saskatchewan border, Oilsands Quest holds over 290,000 ha. of concessions, the core asset of which is the Axe Lake oilsands project on the Saskatchewan side of the line. So far Oilsands Quest has collared 390 holes on its concessions – 322 at Axe Lake – conducted 1,693 km of 3D seismic work, drilled 11 test wells, including three horizontal wells, and built field-test facilities to ascertain the recoverability of its resources.

As of April 2008, Axe Lake’s best discovered resources stood at 1.7 billion barrels. Adding 566 million best discovered barrels from the nearby and contiguous Raven Ridge property in Alberta, Oilsands Quest holds a total of 2.3 billion barrels of bitumen resources.

As it moves the project forward, Oilsands Quest emphasizes to investors one of the major advantages of operating in Saskatchewan. Not only has it benefitted from being one of the first oilsands projects in a relatively new oilsands area but, as they currently stand, the royalty regime in Saskatchewan is relatively favourable.

A graph provided by Oilsands Quest depicting pre- and post-payout royalties in Alberta and Saskatchewan – on a sliding scale related to the market price of oil – shows that Alberta’s regime climbs significantly more quickly than does Saskatchewan’s. At US$50 oil, for example, post-payout royalties in Alberta and Saskatchewan are respectively about US$1.75 and US$1. At US$120 oil the sliding scale rises to US$17 and US$9 respectively. The point being: The royalty regime in Saskatchewan could give Oilsands Quest a comparative advantage over competitors to the west.

Now with more funding secured, Oilsands Quest says it will more or less focus on its Axe Lake project for the rest of the year. As a prelude to calibrate a planned steam injection test, Oilsands Quest is now conducting an electrical heating test of the Axe Lake deposit. The steam test will give Oilsands Quest an idea of how easily it can liberate bitumen from the deposit. And if one day the company is successful in bringing Axe Lake to production, it will firmly and finally put Saskatchewan on the map of Canada’s oilsands.