February 9, 2010 / 4:11 PM / 8 years ago

UPDATE 1-Nexen says Long Lake oil sands output rising

* Long Lake December production averaged 18,000 bpd

* More wells at project being injected with steam

* Partner Opti Canada says annual loss narrowed

CALGARY, Alberta, Feb 9 (Reuters) - Nexen Inc NXY.TO said on Tuesday that production at its Long Lake oil sands project in northern Alberta is improving, as it ramps up output of the steam needed to liquefy the tarry-bitumen trapped in the sands.

Nexen, which has struggled to boost production at the site south of Fort McMurray, Alberta, since Long Lake opened late in 2008, said production averaged 13,600 barrels per day during the fourth quarter, well below the project’s planned 70,000 bpd capacity.

However it said output is gaining as it pumps additional steam into more of its wells. The project is now producing 18,000 bpd, up 1,000 bpd from December, after it increased the amount of steam it can generate.

The company said 57 of the well sites at the project are producing the tar-like bitumen it upgrades into refinery-ready synthetic crude and a further 19 wells are expected to begin producing within a few months.

However the company said the amount of steam needed to produce each barrel is well above target, with six barrels of steam needed to produce one barrel of bitumen, twice Nexen’s goal. Though it expects the amount of steam needed to fall.

The Long Lake project uses steam-assisted gravity drainage technology to produce the bitumen, where steam is pumped into the ground to liquefy the thick crude so it can flow to the surface. Producers aim for the lowest possible amount of steam per barrel of crude to reduce production costs.

Nexen issued its update on the Long Lake project to coincide with an earning release by partner Opti Canada Inc OPC.TO, which holds a 35 percent stake in the project.

Opti, which launched a strategic review last year that could end with a sale of the company, said on Tuesday its annual loss narrowed to C$306 million ($286 million), or C$1.28 per share, in 2009 from C$477 million, or C$2.43, a year earlier.

The company did not provide quarterly results.

Nexen shares dropped 5 Canadian cents to C$23.52 by midmorning on the Toronto Stock Exchange while Opti fell 6 Canadian cents to C$1.85.

$1=$1.07 Canadian Reporting by Scott Haggett; editing by Rob Wilson

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