Oilsands Quest announces independent resource estimates, announces initialization of engineering for a commercial project and provides update on reservoir testing program



    Amex:   BQI

    CALGARY, June 26 /CNW/ - Oilsands Quest Inc. (Amex:   BQI) announces its
independent resource estimates for its Axe Lake Discovery and its Raven Ridge
Discovery. Raven Ridge has been reclassified to a Discovery from an "area of
interest". Oilsands Quest announces the initialization of engineering plans
for the first 30,000 barrels per day commercial project planned to develop a
portion of the Axe Lake Discovery and provides an update on its reservoir test
program.

    
    Independent resource estimate

           Summary of Discovered and Undiscovered Bitumen Resources
             McDaniel & Associates - October 2007 and June 2008
                            (Billions of barrels)

                              Axe Lake        Raven Ridge          Total
                          ---------------------------------------------------
                           2007     2008     2007     2008     2007     2008
                          ---------------------------------------------------
    Estimated Discovered
     Bitumen Resources
     (Discovered Bitumen
     Initially in-Place)
      Low Estimate (P90)  1.117    1.241      n/a    0.337    1.117    1.578
      Best Estimate (P50) 1.344    1.723      n/a    0.566    1.344    2.289
      High Estimate (P10) 1.547    2.334      n/a    0.727    1.547    3.061

    Estimated Undiscovered
     Bitumen Resources
     (Undiscovered Bitumen
     Initially in-Place)
      Low Estimate (P90)    n/a      n/a      n/a    0.493      n/a    0.493
      Best Estimate (P50)   n/a      n/a      n/a    1.949      n/a    1.949
      High Estimate (P10)   n/a      n/a      n/a    3.523      n/a    3.523

    Estimated Discovered
     plus Undiscovered
     Bitumen Resources
     (Discovered and
     Undiscovered Bitumen
     Initially in-Place)
      Low Estimate (P90)  1.117    1.241      n/a    0.830    1.117    2.071
      Best Estimate (P50) 1.344    1.723      n/a    2.515    1.344    4.238
      High Estimate (P10) 1.547    2.334      n/a    4.250    1.547    6.584
    

    McDaniel & Associates Consultants Ltd. has conducted an independent
resource estimate of a portion of Oilsands Quest's permit lands, based on data
obtained from the results of drilling up to March 26, 2008 (the end of the
winter 2007/08 drilling program) and other sources and including the physical
examination of cores and geophysical logs. McDaniel & Associates has reported
the estimates of discovered and undiscovered resources (see Definitions
section below) for a portion of the Axe Lake Discovery and a portion of the
Raven Ridge Discovery. The estimates are effective as of April 30, 2008 and
were prepared as of June 23, 2008. The table above includes a comparison to
the independent resource estimate of the Axe Lake Discovery prepared by
McDaniel & Associates in October 2007 based on the results of the winter
2006/2007 drilling program.
    The estimates reflect Oilsands Quest's 100% interest in the Axe Lake and
Raven Ridge Discoveries and represent only those resources that have been
independently evaluated. Independent estimates of the resource potential of
Oilsands Quest's other lands will follow when complete.
    The area of the discovered resource estimate within the Axe Lake
Discovery covers approximately 41 sections of Permits PS00208 and PS00210
located within Townships 94 and 95, Ranges 24 and 25W3 in Saskatchewan,
approximately 115 kilometres (69 miles) northeast of Fort McMurray. The area
of the discovered resource estimate within the Raven Ridge Discovery covers
approximately 10 sections located within Townships 93 and 94, Range 1W4 in
Alberta, directly to the east of the Axe Lake Discovery area (plus 38 sections
for the undiscovered resource estimate). For a map of the Axe Lake Discovery
and Raven Ridge Discovery areas, please see the company's website.
    The total area covered by these discovered resource estimates represents
approximately 4.6% of Oilsands Quest's total contiguous permit and license
lands (discovered plus undiscovered represents approximately 8%). Other
permit, license and lease lands, including areas that Oilsands Quest considers
highly prospective based on extensive seismic and other data, have not been
evaluated at this time.
    Bitumen resources within the portion of the Axe Lake Discovery area
reviewed by McDaniel & Associates have been classified as discovered resources
due to the density of delineation drilling on this property. Bitumen resources
within the portion of the Raven Ridge Discovery area have been classified as
both discovered resources and undiscovered resources, as much of the Raven
Ridge area remains undrilled at this time (see definitions of "discovered
resources" and "undiscovered resources", and related definitions, below). With
respect to the discovered resources, there is no certainty that it will be
commercially viable to produce any portion of the resources. With respect to
the undiscovered resources, there is no certainty that any portion of the
resources will be discovered and, if discovered, there is no certainty that it
will be commercially viable to produce any portion of the resources.
    These estimates of discovered and undiscovered bitumen resources have not
yet been sub-classified based on recoverable volumes, as additional reservoir
data is required to determine the optimal in-situ exploitation method for the
Axe Lake and Raven Ridge Discoveries. The estimates have been prepared and
presented in accordance with the Canadian standards set out in the Canadian
Oil and Gas Evaluation Handbook ("COGEH") and National Instrument 51-101 ("NI
51-101"). In December 2007, NI 51-101 was amended to provide further guidance
on standards of disclosure of this nature. A key element of the new amended
standards prescribes that estimates of bitumen resources must relate to the
most specific categorization of resources, as set out in the COGEH and must
identify what portion of the estimate is attributable to each category. Under
the COGEH classification system, "discovered resources" are sub-classified
further as "contingent resources" and "discovered unrecoverable resources"
(with respect to "undiscovered resources", the equivalent sub-classification
is "prospective resources" and "undiscovered unrecoverable resources"). The
determination of which portions of the discovered and undiscovered resources
at Axe Lake and Raven Ridge can be deemed to be contingent and prospective,
respectively, (i.e. "recoverable") and which portions of the estimates are
deemed to be unrecoverable at this time requires that the evaluator prepare an
estimate of this proportionate breakdown (see definitions of "discovered
resources", "undiscovered resources", "contingent resources", "prospective
resources" and related definitions below).
    McDaniel & Associates is of the opinion that significant portions of the
discovered and undiscovered bitumen resources at Axe Lake and Raven Ridge are
potentially recoverable using existing demonstrated technologies. However,
insufficient reservoir data exists at this time to allow McDaniel & Associates
to estimate the quantities of recoverable and unrecoverable volumes underlying
the current estimates of discovered resources and undiscovered resources at
Axe Lake and Raven Ridge. Oilsands Quest and McDaniel & Associates expect that
additional data will be derived from the reservoir test program Oilsands Quest
intends to conduct during 2008/2009. The additional data to be gathered from
this reservoir test program will include reservoir pressure, additional
permeability and mobility data, flow data and bitumen/till interface behavior.
McDaniel & Associates advises that this data is required in order to properly
estimate the proportions of recoverable and unrecoverable volumes. It is
expected that when this data is available, Oilsands Quest will engage an
independent qualified reserves evaluator to provide the further
sub-classification of the discovered and undiscovered resource estimates at
Axe Lake and Raven Ridge as contingent resources and prospective resources.
    Similar to other bitumen accumulations within the eastern portion of
Alberta, the Axe Lake and Raven Ridge Discovery areas lack a distinct
overlying shale zone. McDaniel & Associates is of the opinion that the absence
of a distinct overlying shale zone may preclude the use of certain
high-pressure in-situ recovery methods, but that the quality of the reservoirs
and high bitumen saturations present at the Axe Lake and Raven Ridge areas
provide the potential for extraction using a number of existing technologies
as well as other low pressure in-situ extraction methods currently in pilot
testing within other areas of the Athabasca Oil Sands region. At this time,
Oilsands Quest is actively engaged in executing its reservoir test program and
related laboratory simulation studies that will support the technical review
and analysis of the suitability of each of these methods for extraction
operations at Axe Lake and Raven Ridge. Potential extraction methods that may
be applicable to Axe Lake and Raven Ridge include low-pressure SAGD
operations, enhanced SAGD, SAGD combined with methane injection to manage
steam-chamber growth, and electro-thermal heating. Oilsands Quest has received
interim results from laboratory simulation and computer simulation studies
that indicate there is good potential for bitumen recovery using hot water
and/or steam and steam/solvents. Further, these studies indicate that it is
reasonable to expect that steam pressures can be managed and controlled to
ensure that penetration above the McMurray bitumen-containing formation is
limited and that heat losses to the overburden would be minimal. These
simulation studies are being conducted to assist in the specification of
pressure and temperature conditions that will form part of the on-site
reservoir test program later this year.

    Preliminary project engineering

    Oilsands Quest and its engineering consultants have embarked upon
preliminary engineering of the first 30,000 barrels per day commercial project
planned for the development of Axe Lake in the specific area where the first
series of reservoir tests are being conducted. Management also continues to
conduct advanced economic feasibility and risk assessment studies for full
commercial project development, including assessment of a "fast-track"
approach to a first prospective project, which could result in completion
during 2012 or 2013. Oilsands Quest has also commissioned a study of
infrastructure and markets by Purvin & Gertz Inc. to assist in its planning
process. Development of a commercial project remains subject to regulatory and
other contingencies such as successful reservoir tests, board sanctioning and
financing.

    Current status of Axe Lake Discovery reservoir test program

    Site preparation and construction of facilities for Oilsands Quest's
reservoir test program at Axe Lake commenced in January 2008 and were halted
through April and May for spring break-up. Activity recommenced in June 2008
and is ongoing at present. The large steam generator Final Acceptance Test was
successfully concluded and the steam generator is being transported to site.
Other major equipment will also arrive on site during facilities installation
which commences first week of July. Steam and hot water injection into the
reservoir on Test Site 1 is planned for late summer 2008.
    Phase One of the Axe Lake Discovery reservoir test program will consider
up to three test sites (with varying overburden and pay thicknesses) with one
vertical injection well and five vertical observation wells per test site. The
purpose of Phase One of the Axe Lake test program is to measure
resource-specific heat and fluid movement under specific operating conditions
on a field scale to complement the company's ongoing simulation and laboratory
analysis studies. Phase One has received regulatory approval. Current plans
call for placement of horizontal wells in late summer 2008, with steam and hot
water injection to begin following initial results from the Phase One program
at Test Site 1 subject to the requisite approvals.
    Phase Two of the test program will consider expanding the three test
sites with horizontal wells and/or injecting mobilization agents other than
steam. The purpose of Phase Two is to evaluate and analyze information
gathered from Phase One regarding mobilization with steam and/or hot water and
to measure field-scale response using horizontal wells. Phase Three of the Axe
Lake Discovery test program is currently in the scoping phase; options being
considered range from a continued reservoir test program to a technology
feasibility pilot to a full commercial demonstration project.

    Definitions

    Discovered resources (equivalent to discovered bitumen
initially-in-place) is defined within the COGEH as that quantity of bitumen
that is estimated, as of a given date, to be contained within known
accumulations prior to production. The recoverable portion of discovered
resources is referred to as production, contingent resources and/or reserves;
the remainder is classified as unrecoverable. Discovered resources are the
summation of all bitumen present, without qualitative or quantitative
assessment to determine the exploitable portion of that resource.

    Undiscovered resources (equivalent to undiscovered bitumen
initially-in-place) is defined within the COGEH as that quantity of bitumen
that is estimated, on a given date, to be contained in accumulations yet to be
discovered. The recoverable portion of undiscovered resources is referred to
as prospective resources; the remainder is classified as unrecoverable.
Undiscovered resources are the summation of all bitumen thought to be present
on undelineated lands, without qualitative or quantitative assessment to
determine the exploitable portion of that resource.

    Contingent Resources is defined within the COGEH as those quantities of
petroleum estimated, as of a given date, to be potentially recoverable from
known accumulations using established technology or technology under
development, but which are not currently considered to be commercially
recoverable due to one or more contingencies. Contingencies may include
factors such as economic, legal, environmental, political, and regulatory
matters, or a lack of markets. It is also appropriate to classify as
contingent resources the estimated discovered recoverable quantities
associated with a project in the early evaluation stage. Contingent resources
are further classified in accordance with the level of certainty associated
with the estimates and may be sub-classified based on project maturity and/or
characterized by their economic status.

    Prospective Resources is defined within the COGEH as those quantities of
petroleum estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development projects.
Prospective resources have both an associated chance of discovery and a chance
of development. Prospective resources are further subdivided in accordance
with the level of certainty associated with recoverable estimates assuming
their discovery and development and may be sub-classified based on project
maturity.

    Discovered unrecoverable resources (equivalent to discovered
unrecoverable petroleum initially-in-place) is defined within the COGEH as
that portion of discovered resources which is estimated, as of a given date,
not to be recoverable by future development projects. A portion of these
quantities may become recoverable in the future as commercial circumstances
change or technological developments occur; the remaining portion may never be
recovered due to the physical/chemical constraints represented by subsurface
interaction of fluids and reservoir rocks.
    The discovered and undiscovered resource estimates described in this news
release were determined in accordance with the COGEH using the following
mutually exclusive categories:

    
    -   Low Estimate: This is considered to be a conservative estimate of the
        quantity of bitumen that exists within the accumulation, which under
        probabilistic methodology reflects a P90 confidence level.

    -   Best Estimate: This is considered to be the best estimate of the
        quantity of bitumen that exists within the accumulation. Under
        probabilistic methodology, this term is a measure of the central
        tendency of the uncertainty distribution (most likely/mode,
        P50/median, or arithmetic average/mean).

    -   High Estimate: This is considered to be an optimistic estimate of the
        quantity of bitumen that exists within the accumulation, which under
        probabilistic methodology reflects a P10 confidence level.
    

    Canadian disclosure standards

    In reviewing this news release, it is necessary to recognize the
differences between resources (which are reported as required under Canadian
law) and reserves (which are not being reported). Investors are cautioned that
the discussion of the report in this news release does not contain any
information about deposits that would qualify as deposits of "reserves" under
SEC Securities and Exchange Commission Industry Guide 7. Further, the terms
"discovered resource" "undiscovered resource" and related definitions are
Canadian terms defined in COGEH. COGEH standards differ from the terminology
and standards set forth in Industry Guide 7 and, as a consequence, the
information contained in this press release may not be comparable to
information provided by other similar companies in the United States.
Investors should not assume that any part of the deposits discussed in this
news release that are categorized as "discovered resources" or "undiscovered
resources" according to Canadian standards will ever be considered "reserves"
under applicable Canadian or U.S. standards. The commercial viability of
discovered and undiscovered resources is affected by numerous factors which
are beyond the Company's control and which cannot be predicted, such as the
potential for further financing, environmental, permitting, legal, title,
taxation, socio-political, marketing or other relevant issues. The estimates
of discovered and undiscovered resources for the lands described in this news
release do not reflect the same confidence level for Oilsands Quest total
lands.

    About Oilsands Quest

    Oilsands Quest Inc. is aggressively exploring Canada's largest contiguous
oil sands land holding by applying its technical expertise to develop multiple
global-scale discoveries. The company (www.oilsandsquest.com) is the
originator of Saskatchewan's emerging oil sands industry.

    Forward-looking information

    Except for statements of historical fact relating to the company, this
news release contains certain "forward-looking information" within the meaning
of applicable securities law. Forward-looking information is frequently
characterized by words such as "plan", "expect", "project", "intend",
"believe", "anticipate", "estimate", "potential", "prospective" and other
similar words or statements that certain events or conditions "may" "will" or
"could" occur. Forward-looking statements such as the discovered resource
estimates and undiscovered resource estimates, references to Oilsands Quest's
drilling program, geophysical programs, reservoir field testing and analysis
program, preliminary engineering and economic assessment program for a first
commercial project, and the timing of such programs are based on the opinions
and estimates of management and the company's independent evaluators at the
date the statements are made, and are subject to a variety of risks and
uncertainties and other factors that could cause actual events or results to
differ materially from those anticipated in the forward-looking statements,
which include but are not limited to risks inherent in the oil sands industry,
regulatory and economic risks, lack of infrastructure in the region in which
the company's resources are located and risks associated with the company's
ability to implement its business plan. There are uncertainties inherent in
forward-looking information, including factors beyond Oilsands Quest's
control, and no assurance can be given that the programs will be completed on
time, on budget or at all. In addition, there are numerous uncertainties
inherent in estimating discovered and undiscovered resources, including many
factors beyond the company's control. In general, estimates of discovered and
undiscovered resources are based upon a number of factors and assumptions made
as of the date on which the estimates were determined, such as geological,
technological and engineering estimates which have inherent uncertainties.
Oilsands Quest undertakes no obligation to update forward-looking information
if circumstances or management's estimates or opinions should change, except
as required by law. The reader is cautioned not to place undue reliance on
forward-looking statements. The risks and uncertainties set forth above are
not exhaustive. Readers should refer to Oilsands Quest's current annual report
on Form 10-KSB, the annual report on Form 10-K to be filed by June 30, 2008
and other document filings, which are available at www.sedar.com and at
www.sec.gov for a detailed discussion of these risks and uncertainties and
details regarding the location and extent of Oilsands Quest's land holdings.





For further information:

For further information: Paul O'Donoghue, Vice President, Investor
Relations and Corporate Planning, Email podonoghue@oilsandsquest.com; General
inquiries and retail investors, contact Hedlin Lauder Investor Relations Ltd.,
Toll Free 1-800-299-7823, Office (403) 232-6251, Email
irinfo@hedlinlauder.com; Institutional investors, contact BarnesMcInerney
Inc., Toll Free 1-866-794-7288, Office (416) 371-0510, Email
oilsands@barnesmcinerney.com

Organization Profile

Oilsands Quest Inc.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890