One of the more common methods to ascertain where oil and gas is located beneath the world's oceans and seas is through the continental drift theory. The theory states that during the Paleozoic Era, between 350 million and 225 million years ago, a single super-continent called Pangea existed. Over time, Pangea broke into separate continents and spread across the globe, making up our modern geographic world.
CGX's concession off Guyana and the location of the first well.
This theory establishes strong relationships about geologic formations that were once together, but over time, have drifted apart. Simply put, if oil and gas deposits exist in one sector of the world, then theoretically there should be similarities across the ocean in areas that were once connected at the time of Pangea.
These geologic similarities have been for the most part in the form of giant turbidite fans. A majority of the world's massive discoveries have been found in these giant turbidite fans. The best evidence of such existence has been proven in the plays that exist in Brazil and their similarities to plays discovered off the West African coast, such as off Nigeria and Gabon.
But along the coastlines of both South America and West Africa, companies are betting that these geologic similarities are consistent in other areas that have yet to be explored, such as Morocco in West Africa and Guyana in South America.
These turbidite fan plays have become a major attraction to operators, especially in frontier areas. One such company has identified two of these turbidite fan targets in a virgin basin off Guyana and is betting they will pay off big - CGX Energy of Canada.
Guyana's fiscal regime
In June 1998, CGX Energy acquired a 100% working interest in the 15,464 sq km Corentyne concession offshore Guyana, consisting of 172 blocks onshore and offshore. The company based its decision to enter Guyana on a number of factors:
- 6,000 km of vintage seismic surveys performed in 1974, 1981, and 1989 identified two giant turbidite fans in the concession - Eagle and Wishbone.
- Two stratigraphic unconformities were also present - Horseshoe East and Horseshoe West.
Also aiding the region's attraction was the favorable fiscal regime the country offered. In 1997, Guyana adopted a new fiscal regime for tax treatment of oil and gas producers, moving it into the top quartile in the world. Apex Consultants estimated that CGX's net proceeds from the fiscal regime are 63%, compared to net company takes of 32% in Alberta and 17% in Venezuela.
CGX was not the first to notice Guyana's potential, however, and they have not been the last. In November 1997, Maxus acquired a 100% interest in the Georgetown Block, about 80 km offshore in water depths ranging from 30 meters to 200 meters. The Georgetown concession is located west of Corentyne and covers an area of 13,100 sq km.
Beginning in mid-1999, the majors began a strong push into the area. In June of that year, Exxon was granted the 15-million-acre deepwater Stabroek Block north of Corentyne. The block is located in water depths between 650 ft and 10,000 ft. This marks the first deepwater concession in the country's waters.
In August, a consortium of Shell, Burlington Resources, Total, and the Korean National Oil Company took a 18,500 sq mile deepwater concession to the east of Corentyne in Suriname waters. The companies have since commenced a 5,400 km seismic survey over the concession in September, 1999.
Later in September, Italian giant ENI got into the game by taking a 25% stake from Maxus for the George town Block. In a fin ancial interview held with Kerry Sully, CEO of CGX, Sully said the fact that the majors are moving in is a very good sign. "Majors need large reserves and targets to justify any work, so something must be there."
Eagle, Wishbone, Horseshoes
The Eagle, Wishbone, and Horseshoe East and Horseshoe West targets were originally identified in the vintage seismic surveys. CGX also shot an 1,800-km seismic program over the targets in May 1999 using Western Geophysical's M/V Kenda seismic vessel. The company began processing of the data in June 1999.
CGX believes the Eagle and Wishbone fans have great potential and further believe that Eagle is comparable to the Roncador fan off Brazil.
The Horseshoe West and Horseshoe East targets are stratigraphic traps located updip of the Berbice Canyon. The two targets have a combined P50% resource potential (50% probability) of 425 million bbl. The company had originally planned its first well in the Horseshoe West financed by rights offering and an offering of units in an earn-in syndicate called Guyana Offshore Exploration Syndicate.
CGX said the seismic survey over the target showed continuous amplitude and AVO anomalies over 200 sq km - one of very few reservoirs in the world with this large of an large areal extent. In addition, at the time a rig to drill the target became available to drill either Eagle of Wishbone, mobilization/ demobilization costs were excessive. How ever, at the time, investor reaction to the program was disappointing and the company decided to focus instead on the turbidite fans as first targets.
Eagle and Wishbone, the two turbidite fan targets, have a combined P50% potential of 1.2 billion bbl, with Eagle being the larger of the two. The company has received positive AVO analysis on both targets. In September 1999, four drillable targets, with the priority on Eagle, were identified.
Following analysis of the seismic, the company identified Eagle on eight new strike (one vintage) lines and 2 new (2 vintage) dip lines. The Eagle Turbidite Fan is estimated to have an area of 29,000 acres with a thickness of approximately 600 ft with a P50% resource potential of 850 million bbl.
According to CGX, the reservoir slopes upward to the northwest, with maximum closure above the hydrocarbon/water contact of 1,500 ft. With 1,500 ft of closure, buoyancy/ seal considerations suggest a higher likelihood of oil than gas.
CGX is in the second year of the concession agreement on Corentyne. The agreement calls for drilling by the fifth year of the contract. But the company has decided to begin drilling operations on Eagle in 270 ft water depth.
In February the company contracted the C.E. Thornton jackup from R&B Falcon to drill the first well. The location is 10 km from a well Shell drilled in 1974 - Abary #1. Abary #1 tested significant gas in the mud logs and 34.7° API crude for a thin formation of similar age to the Eagle target. The estimated cost of the well is $7.3 million.
The company is also considering a second exploration well on the Wishbone West target at an estimated incremental cost of US$4.8 million. CGX is currently in discussions with oil and gas companies on participation in both wells.