Oilsands Quest Inc. says it is confident that the Axe Lake Discovery project will produce oil sands for a long time to come.

Exploration for viable oil sands deposits has traditionally been focused in Alberta. However, provincial borders do not mark oil sands territories. Oilsands Quest Inc. is proving this with highly successful oil sands exploration results in northwestern Saskatchewan - the first major oil sands exploration program in the province's history. It has initiated pre-commercialization studies for the Axe Lake Discovery project, which Vice President of Exploration Erinn Kimball believes is a world-class bitumen resource.

“No one's ever really drilled for oil sands in Saskatchewan, so it's a fortunate discovery for us,” Kimball says. “In the early 1970s, there was some legacy drilling which confirmed the presence of oil sands, but oil sands were not a sought-out commodity. People were looking for coal, and drilling was done by companies like Gulf and Shell.

“Oilsands Quest has been focusing on aggressive exploration and delineation programs in Saskatchewan since we acquired our permits in 2004,” Kimball continues. “We confirmed the presence of oil sands in the northwest region of Saskatchewan, and we believed there was viable potential for exploration. We made the discovery; now we have to start defining it. We are leading the development of an oil sands industry in Saskatchewan.”

The Axe Lake Discovery area is located in remote northwestern Saskatchewan and extends east, west and south. The nearest city to Axe Lake Discovery is Fort McMurray, Alberta, which is a major center for oil sands drilling. The nearest Saskatchewan town is La Loche.

Oilsands Quest is in its second year of exploration in Axe Lake Discovery. The company completed 150 structure test holes in March to further delineate the resource. It can only use its working permit for exploration during winter months to take advantage of the frozen ground conditions, Kimball says.

During spring, summer and fall months, Oilsands Quest conducts full-scale environmental surveys of the vegetation and wildlife to acquire all needed baseline information, he notes. This way, the company can track and see if these variables are consistent.

“This is something that would usually be government work,” he says, “and typically, they would have all the data and we'd go ask for it.

“But this is such a remote area that the government of Saskatchewan has not been up there yet to conduct the baseline surveys.”

Oilsands Quest has completed 57 miles of 2-D seismic and 528 miles of aeromagnetic and electromagnetic surveys; installed infrastructure, including drilling pads, road networks and camp facilities that can house 50 to 205 people; and identified numerous exploration leads for future programs. The company is also conducting economic feasibility and risk assessment studies as well as reservoir modeling.

All the surveys and tests will define the physical characteristics and permeability of Axe Lake Discovery's resources. “All this will lead into some type of technology where the resources will tell us how it wants to come out of the ground,” Kimball says. “We are undergoing numerous lab tests in order to help us determine the most suitable insitu recovery technique to pilot. We will not force a technology on it.

“Essen-tially, the physical characteristics of the deposit will determine design parameters for an extraction method.”

This means the company will build the extraction/processing facilities based on the nature of the oil sands themselves. It will build the technology to match the resources, rather than use technology it currently has to extract/process the oil sands.

Although the amount of oil sands that will come from Axe Lake Discovery's bitumen resources has not yet been determined, Oilsands Quest plans to accelerate timelines for its development, and aims to have joint-venture partnership negotiations in the works by the second quarter of 2008, Kimball says.

“I hope the Axe Lake project goes on for a very long time,” Kimball says. “The exploration work will eventually come to an end, but drilling will always continue. As far as getting resources and learning the geological framework of the [land], we will eventually come to a corner where we understand our resources. We're now undertaking all our experiments learning what we can get from our core assets.”

Kimball says it is Oilsands Quest's job to figure out how to most efficiently extract barrels from its reserves and increase the number of barrels produced. He says he is confident the Axe Lake Discovery project will produce 1.5 billion to 2 billion barrels once production starts in 2008. “I think it has the potential to produce several billion barrels one day; there is so much undiscovered potential here it is staggering” Kimball notes. “It is considered a very high-quality deposit with very unique and positive geological characteristics. It is a very coarse grained, continuous sand package that has been deposited.”