Oilsands Quest is evaluating the potential to develop its Axe Lake oil sands discovery in northwestern Saskatchewan using typical steam-assisted gravity drainage (SAGD) technology.

OQI recently drilled 16 core holes across Axe Lake reservoirs to improve the understanding of the overburden characteristics and to test the potential for the overburden to act as a cap rock to contain steam within the reservoir. The preliminary results from an independent reservoir research laboratory show that the core material is a dense clay-rich, low permeability cap rock which demonstrates steam containment characteristics in physical laboratory testing and reservoir computer simulations. The core samples are also being correlated with the Axe Lake 3D seismic data to determine the extent and continuity of this cap across the various reservoirs.

The early results of the overburden testing indicate that the Company may be able to produce bitumen using either a typical SAGD configuration or the bottom up recovery process that OQI has been testing. OQI now believes that the majority of the Axe Lake reservoirs could be developed using proven SAGD bitumen recovery processes, while the remaining resources would likely be more efficiently produced by way of the bottom up recovery configuration.

Based on the encouraging results from the cap rock testing, OQI is developing plans to accelerate work on a new SAGD test pair of wells at Test Site 1 using low pressure steam injection. As SAGD technology matures in the oil sands industry, lower pressure SAGD approaches are proving to deliver technical, economic and environmental benefits, as less energy is required to mobilize the bitumen. The Axe Lake reservoir, with its high porosity, permeability and homogeneity relative to most projects in Alberta, is well suited to lower pressure thermal recovery.

"We are very pleased with these new developments pertaining to the overburden testing," said T. Murray Wilson, Chairman, President and CEO of OQI. "Our understanding of the Axe Lake reservoir and the overburden characteristics has grown tremendously through our testing program. Using proven SAGD oil sands recovery technology could advance our progress toward commercial development, which is currently our top priority."

Tags: Oilsands Quest Inc.