Growing in situ oilsands producer MEG Energy has outlined a capital-spending program of $510 million for 2018, down from its $590 million budget for 2017 as work starts to wind down on a major growth project.
The company expects to reach the production milestone of 100,000 bbls/d in early 2019, positioned for future growth with application of two proprietary technologies: the proven eMSAGP process and eMVAPEX, which it is currently testing.
“If proven successful, eMVAPEX, along with eMSAGP, will form the basis for the majority of our highly-economic growth beyond 100,000 bbls/d to our permitted capacity of 210,000 bbls/d at Christina Lake,” CEO Bill McCaffrey said in a statement.
“Our 2018 capital program sets the stage for production growth of approximately 8 to 10 percent in 2019."
Here’s a look at how the $510 million will play out.
$220 million: Sustaining and maintenance
- Drilling of new sustaining well pairs and major turnaround activities at Christina Lake Phase 2B processing facilities
- Planned turnaround at Phase 2B is anticipated to cost $38 million and last approximately 35 days during the second quarter. This includes thorough vessel inspections as per regulatory requirements
$120 million: complete eMSAGP roll out
- Remaining spend of $350 million project total to apply eMSAGP across all phases at Christina Lake
- MEG says the majority of the capital will support the drilling of new well pairs, which will allow it to increase production by utilizing steam freed up by eMSAGP
$100 million: eMVAPEX testing
- MEG is increasing its eMVAPEX testing spend in 2018 to $100 million, up from $70 million in 2017
- To date, the company says it has implemented the technology on three well pairs and their associated infill wells with encouraging results.
- The 2018 capital allows for the conversion to eMVAPEX of up to seven additional well pairs and associated infills, and the construction of a solvent recycling facility to test the commerciality and scalability of the technology.
$70 million: Infrastructure and other
- MEG says that the majority of the remaining $70 million will be allocated towards field infrastructure necessary to support the company's ongoing production growth.
- Other initiatives include marketing, regulatory and reservoir optimization capital.
Internally generated cash flow and cash on hand are expected to fund the 2018 capital program.