The National Post is Canada’s second largest national paper.
CALGARY — Barely five years ago, Oilsands Quest Inc. proved there are oil sands in Saskatchewan and wanted to build the province’s first major project.
Today, the company is in bankruptcy protection in Canada and the United States and is looking for a buyer, keeping on hold the province’s ambition to be a part of the booming industry.
As established oil sands companies announce big profits and big expansions, Oilsands Quest’s story is a reminder that a lot can go wrong, fast, in the business, including running out of cash, mounting costs, poor geology or simply being ahead of the times.
Still, Garth Wong, president and CEO of the company, is hopeful Saskatchewan’s oil sands will get a second chance as the company waits for the outcome of a sales process now under way, in an improving investment climate and as other companies move close to its edge of the basin.
“It’s a great asset,” he said in an interview. “We have billions of barrels of discovered resource. We just need to get over this financing hurdle.”
Convinced that a sliver of the Athabasca basin spilled into Saskatchewan, the junior set out to explore in the province, just east of Fort McMurray, when the industry in Alberta was overheating in the middle of the last decade.
Christopher Hopkins, the CEO during the company’s early days and still a member of the board, was intrigued by evidence of bitumen deposits, some of which could be seen lining the banks of the Clearwater River. In 2006, Oilsands Quest made a discovery at Axe Lake, not far from where two oil majors, Shell Canada Ltd., a subsidiary of Royal Dutch Shell PLC, and Gulf Canada Ltd., taken over by ConocoPhillips, found bitumen in 1974.
The province was so excited by the find that Brad Wall held up a scoop of one of Oilsands Quest’s core samples at a Calgary fundraiser in 2007, when he was still leader of the opposition, to show the deposits indeed existed in his province.
The company went to work with an ambitious drilling program to determine their size, eventually booking more than two billion barrels of discovered resource. Plans for a multi-billion-dollar in-situ oil sands project, with startup scheduled three years from now, were on the horizon.
“Nobody had been in Saskatchewan before,” said Mr. Wong, who took over as CEO a year ago. “We were successful in proving up the oilsands in the areas that we were exploring.”
Oilsands Quest nailed down three major areas saturated with bitumen – Wallace Creek, Axe Lake and Raven Ridge – with the potential to support 100,000 barrels a day of production in a province so eager to produce them it has more favourable royalty terms than Alberta.
But the financial crisis struck in 2009. The company ran out of cash just as it needed $23-million to fund a critical pilot project.
The deposits it found were of the highest quality, but were capped by a glacial till, rather than shale as is typical on the Alberta side. They required field testing to show that they would contain steam used in traditional steam-assisted gravity drainage technology.
For the rest of this column, please go to the National Post/Financial Post website: http://business.financialpost.com/2012/02/13/hope-lives-for-saskatchewan-oil-sands/?__lsa=4a14c8e4