Dover Commercial Project Application Filed and Athabasca Receives Approval
for TAGD Test

CALGARY, Dec. 21 /CNW/ - Athabasca Oil Sands Corp. (TSX:  ATH) is pleased to announce that Dover Operating Corp. (Dover OPCO) has submitted the application to the regulatory authorities for Athabasca's 40% owned Dover Commercial Project, 70 kilometres northwest of Fort McMurray.  Also, Athabasca received regulatory approval for its thermal assisted gravity drainage (TAGD) test at its 100% owned Dover West, 90 kilometres northwest of Fort McMurray and has approved its 2011 capital budget.

According to Bill Gallacher, Athabasca's chair of the board, the company has a bright future as it continues to deliver what it promises.  "In just four years, Athabasca's efforts have resulted in over 12 billion barrels of resource (gross).  The company has the potential to become one of the largest in situ bitumen producers in Canada."

Athabasca has net resources and reserves of 8.820 billion barrels of contingent resource (best estimate) and approximately 114 million barrels of probable reserves.

Dover Commercial Project

Dover OPCO has applied to the Energy Resources Conservation Board (ERCB) and Alberta Environment to build a 250,000 barrels/day oil sands project at Dover, in northern Alberta.  It anticipates a 24-month regulatory review before it receives the necessary approvals.  The first phase is expected to be constructed in Dover North, which is currently intended to be a 50,000 barrels/day project. 

The Dover North central processing facilities are expected to be designed to be large enough for the first two phases of the project.  Another plant is expected to be built in Dover South for subsequent development phases.  The McMurray sands are up to 34 metres thick and are aptly suited for steam assisted gravity drainage (SAGD).

Athabasca and Cretaceous Oil Sands Holdings Limited, a wholly-owned subsidiary of PetroChina International Investment Company Limited, formed Dover OPCO to develop and manage both the MacKay River and Dover Commercial Projects.  Athabasca owns 40% and PetroChina 60% of both projects.  The MacKay River application was filed December 20, 2009 and approvals are expected in late 2011 to early 2012.

"The joint venture with PetroChina provided Athabasca with financial capability to bring these projects forward," says Sveinung Svarte, president and CEO.  "Joint ventures are very well suited for complicated capital intensive projects, such as oil sands developments.  It allows the partners to join forces and leverage a wider set of strengths.  I think that recent partnership announcements between major oil sands developers have validated our choice of joint ventures as a business model for our first two projects."

Dover West Experimental Test Approved

The ERCB has approved Athabasca's application for its two-well TAGD winter test at Dover West.  The company plans to drill two horizontal wells, with a vertical spacing of between eight and 10 metres, into the Leduc carbonate reef to perform initial testing of TAGD, using conductive heating to confirm if this reservoir can deliver commercial production at temperatures considerably lower than those required for SAGD.  The reservoir will be gently heated before production is started from the lower well. 

In addition to the TAGD test, Athabasca plans to conduct a one-well steam injection test this winter, also in the Leduc carbonate, which will provide important information about reservoir characteristics.

Athabasca has a 100% ownership of these Dover West projects.  The company's Dover West area contains Cretaceous age oil sands with approximately 2.0 billion barrels of contingent resource (best estimate) in addition to approximately 2.7 billion barrels of contingent resources (best estimate) in the Devonian age Leduc carbonate formation. 

2011 Budget Highlights

Athabasca has set a target to become one of the leading in situ bitumen producers.    To achieve this ambitious goal, Athabasca's board of directors approved a 2011 annual capital budget of $302 million (net) to execute its exploration and development program including:  purchasing certain long lead items for the Hangingstone project, TAGD and SAGD testing of the Dover West carbonates, drilling up to 140 wells, acquiring up to 60 square kilometres of 3D seismic and acquiring up to 130 kilometres of 2D seismic.  It also expects to hire 100 new employees during the next 15 months to expand its technical and operating capabilities.

Athabasca recently acquired strategic infrastructure - gas supply pipelines, roads, an airstrip, work camp and other necessities - in the Dover and Dover West areas.  This will enable the company to more efficiently move drilling, testing and seismic equipment onto key locations and to perform the upcoming winter tests at Dover West.

Athabasca is a dynamic oil sands company formed to develop and produce bitumen in the Athabasca region of northeastern Alberta.  It was incorporated in 2006 with a goal to use the latest technology to produce bitumen in a sound and safe manner.  It has excellent assets, talented people and is very well financed. 

The company's shares are traded on the Toronto Stock Exchange under the trading symbol ATH.  On December 20, it was added to the Canadian Global Equities Index Series, a sub-index of the FTSE Index in London, England.  The company has a current market capitalization of $6.2 billion.

Reader Advisory

Forward-Looking Information

This News Release contains forward-looking information that involves various risks, uncertainties and other factors. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "predict", "pursue" and "potential" and similar expressions are intended to identify forward-looking statements. The forward-looking information is not historical fact, but rather is based on AOSC's current plans, objectives, goals, strategies, estimates, assumptions and projections about AOSC's industry, business and future financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this News Release should not be unduly relied upon. These statements speak only as of the date of this News Release. In particular, this News Release may contain forward-looking statements pertaining to the following: AOSC's capital expenditure programs; the estimated quantity of AOSC's Probable and Possible Reserves and Contingent Resources; AOSC's drilling plans; AOSC's plans for, and results of, exploration and development activities;; AOSC's plans with respect to its Hangingstone and Dover West assets including the timing for submission of the applications for and receipt of project approvals, the expected timing of first steam and the projected size of subsequent phases, anticipated future production from and the subsequent development of the Hangingstone and Dover West assets;; and the timing for receipt of regulatory approvals. With respect to forward-looking statements and forward-looking information contained in this News Release, assumptions have been made regarding, among other things: AOSC's ability to obtain qualified staff and equipment in a timely and cost-efficient manner; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which AOSC conducts and will conduct its business; the applicability of technologies for the recovery and production of AOSC's reserves and resources; future capital expenditures to be made by AOSC; future sources of funding for AOSC's capital programs; AOSC's future debt levels; geological and engineering estimates in respect of AOSC's reserves and resources; the geography of the areas in which AOSC is conducting exploration and development activities; and AOSC's ability to obtain financing on acceptable terms. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth above and under the headings "Notice to Investors -Forward-Looking Statements" and "Risk Factors" in the Company's prospectus dated March 30, 2010, which is available on the SEDAR website at www.sedar.com ("Prospectus"), including: fluctuations in market prices for crude oil and bitumen blend; general economic, market and business conditions; dependence on the PetroChina subsidiary as the joint venture participant in the MacKay River and Dover oil sands projects; failure to meet the conditions precedent to the exercise by AOSC of the Put/Call Options (as defined in the Prospectus), including failure to receive regulatory approval for the MacKay River oil sands project and/or the Dover oil sands project when anticipated or at all; failure to obtain necessary regulatory approvals for completion of the Put/Call Option transactions on the terms and conditions set forth in the Put/Call Option Agreement; failure to meet development schedules and potential cost overruns; increases in operating costs can make projects uneconomic; the effect of diluent and natural gas supply constraints and increases in the costs thereof; gas over bitumen issues affecting operational results; variations in foreign exchange and interest rates; factors affecting potential profitability; the global financial crisis; uncertainties inherent in estimating quantities of reserves and resources; AOSC's status and stage of development; uncertainties inherent in Steam Assisted Gravity Drainage ("SAGD"), Cyclic Steam Stimulation ("CSS"), thermal assisted gravity drainage ("TAGD") and other bitumen recovery processes; the potential for adverse consequences in the event that AOSC defaults under certain of the PetroChina Transaction Agreements (as defined in the Prospectus); environmental risks and hazards and the cost of compliance with environmental regulations, including greenhouse gas regulations and potential Canadian and U.S. climate change legislation; failure to obtain or retain key personnel; the substantial capital requirements of AOSC's projects; the need to obtain regulatory approvals and maintain compliance with regulatory requirements; extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time; changes to royalty regimes; political risks; failure to accurately estimate abandonment and reclamation costs; risks inherent in AOSC's operations, including those related to exploration, development and production of oil sands reserves and resources, including the production of oil sands reserves and resources using SAGD, CSS or other in-situ technologies; the potential for management estimates and assumptions to be inaccurate; long term reliance on third parties; reliance on third party infrastructure for project facilities; failure by counterparties to make payments or perform their operational or other obligations to AOSC in compliance with the terms of contractual arrangements between AOSC and such counterparties and the possible consequences thereof; the potential lack of available drilling equipment and limitations on access to AOSC's assets; aboriginal claims; seasonality; hedging risks; risks associated with establishing and maintaining systems of internal controls; insurance risks; claims made in respect of AOSC's operations, properties or assets; the potential for adverse consequences as a result of the change of control provisions in the PetroChina Transaction Agreements; competition for, among other things, capital, the acquisition of reserves and resources, export pipeline capacity and skilled personnel; the failure of AOSC or the holder of certain licenses or leases to meet specific requirements of such licenses or leases; risks arising from future acquisition activities; risks relating to the reliance on financial information, including that financial information does not reflect the added costs that AOSC expects to incur as a public entity; volatility in the market price of the common shares; the effect that the issuance of additional securities by AOSC could have on the market price of the common shares; incorrect assessment of the value of the Excelsior transaction; failure to realize the anticipated benefits of the Excelsior transaction; and risks relating to AOSC's dividend policy. In addition, information and statements in this News Release relating to "reserves" and "resources" are deemed to be forward-looking information and statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated, and that the reserves and resources described can be profitably produced in the future. The assumptions relating to AOSC's reserves and resources are contained in the reports of GLJ Petroleum Consultants Ltd. dated effective April 30, 2010, DeGolyer and MacNaughton Canada Limited dated effective April 30, 2010 and the report of McDaniel & Associates Consultants Ltd. dated effective December 31, 2009. The risks and uncertainties referred to above are described in more detail in AOSC's prospectus dated March 30, 2010 and in AOSC's Statement of Oil and Gas Reserves Data and Other Oil and Gas Information for the Year Ended December 31, 2009, each of which is available on the SEDAR website at www.sedar.com.  See also AOSC's press release issued on June 9, 2010 and its material change report dated June 18, 2010.  Readers are cautioned that the foregoing list of risk factors should not be construed as exhaustive. The forward-looking statements included in this News Release are expressly qualified by this cautionary statement. AOSC does not undertake any obligation to publicly update or revise any forward-looking statements except as required by applicable securities laws.

Note on Dover West Leduc Carbonate Resources

The company's resources at its Dover West Leduc Carbonates asset is contained in carbonate reservoirs. SAGD and Cyclic Steam Stimulation ("CSS"), the proposed in-situ bitumen recovery processes to develop this asset, are considered to be "technology under development" in carbonate reservoirs. The successful development of the company's carbonate reservoirs depends on, among other things, the successful development and application of SAGD and CSS or other recovery processes to carbonate reservoirs. Although the technology has been developed for application to non-carbonate reservoirs, there are no known successful commercial projects that use SAGD or CSS to recover bitumen from carbonate formations and there exists a large range in the expected recoverable volumes, the lower end of which may not be economically viable. The principal risks associated with SAGD and CSS recovery in carbonate reservoirs are (i) the possibility of unexpected steam channeling which would increase steam requirements resulting in increased costs and potentially reduced economically recoverable bitumen volumes, and (ii) potential mechanical operating problems due to production of fines which could cause wellbore plugging and reduced bitumen production rates and potential interruption of surface production operations. Although the technical risks associated with "technology under development" have been accounted for in the independent resource evaluation of the Dover West Leduc Carbonates asset, the timeline for verification of "technology under development" has inherent uncertainty. Development will involve significant capital expenditures and a lengthy time to project payout and project payout is not assured. If a pilot project and/or the technology under development do not demonstrate potential commerciality in carbonate reservoirs then the company's projects on these assets may not proceed and this may occur only after significant expenditures have been incurred by the company.

For further information:

Heather Douglas
Vice President, Communications & External Affairs
[phone]    [email protected]