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A Deep Dive into South American E&P The Guianas: Welcome to the Jungle Matt Portillo Anish Kapadia March 18, 2011 **Important Disclosures begin on page 18 of this document**
A Deep Dive into South American E&P
The Guianas: Welcome to the Jungle
Matt Portillo
Anish Kapadia
March 18, 2011
**Important Disclosures begin on page 18 of this document**
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The Guianas: Why should you care?
If you own Repsol, Murphy, Tullow, YPF, or Canacol you should care. The purest play is Canadian CGX which is a 100% exposed to Guyana. The Guianas, bordering two prolific oil producers (Venezuela and Brazil), is a frontier region which will see at least 5 exploration wells drilled this year (including 3 in progress), with very favourable fiscal terms in comparison to neighbouring countries. It is cited by the USGS as potentially having 15Bbbls of oil with prospect sizes of up to 700mmbbls (P10) targeted in 2011. The area has come into focus following the resolution of border disputes and the analogous West African cretaceous fan play discoveries (e.g. Ghana).
Located in the north‐eastern corner of South America, the Guianas comprises two independent states (Guyana and Suriname) and one overseas department of France (French Guiana). With increased momentum in drilling activity, 2011 will be a defining year for the Guianas. Notably, Tullow Oil (a pioneer in the West African Transform Margin plays) and partners, will be targeting two Turonian aged Turbidites (Zaedyus and Jaguar), offshore Guyana and French Guiana. Murphy recently announced the Caracara‐1 well, spud last November, was unsuccessful due to lack of effective trap and migration. However the company stated that it encountered good quality reservoirs as well as 600m of shales with oil shows above its target zone, reducing some of the geological risk and reaffirming the prospectivity of the basin; Murphy is currently drilling its second well in the basin, Aracari. Prospects range from 200mmboe to 2Bboe, making any discovery in the basin transformational for the companies and countries involved. However, the Guianas hydrocarbon industry is still in its infancy and there is a dearth of infrastructure across the region. Furthermore, we believe it will difficult to monetise gas discoveries unless sizeable (5 TCF+), given the inadequate infrastructure and location relative to end markets.
The Guianas: E&P Facts & Figures
Country/Region French Guiana Guyana SurinameOil Production (mbopd) n.a n.a 16Oil Consumption (mbopd) 7 10 13Gas Production (mmcf/d) n.a n.a n.aGas Consumption (mmcf/d) n.a n.a n.aReserves (mmbbl) n.a n.a 90Principal Marketed Crude n.a n.a Saramacca Crude (15.8o API)Regional F&D Costs ($/boe)* $9.4 $8.5 $8.7
Companies Exposed Northern Petroleum, Shell, Tullow, Total, Wessex Exp.
Canacol, CGX, Groundstar, Exxon, Repsol, Shell, Sagres, Tullow,
Inpex, Murphy, Petro Hunt, Repsol, Tullow
Source: TPH
, E.IA
*TPH estimates
Source: Latin W
orld
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The E&P Scene
Over the years, there has been limited success to discover hydrocarbons, both offshore and onshore. Regional activity was halted from 2000‐2007 as the Surinamese Navy prevented CGX, a Canadian E&P company, from spudding a well over a maritime border dispute between Guyana and the Suriname in 2000. The dispute was eventually settled by the United Nations International Tribunal for the Law of the Sea (ITLOS) in 2007. The lack of capital investment and drilling hiatus leaves the basin underexplored. Prospect size (200‐2,000mmboe) and opening of the West Africa Transform Margin reignited interest in the region’s hydrocarbon industry in 2008. The basin not only stretches along the interior and coastal areas of both Guyana and Suriname, as its name suggests, but also extends into French Guiana and Venezuela.
Hydrocarbon Potential and risks: In 2001, the United States Geological Survey (USGS) estimated that ~15Bbbls of oil and ~42Tcf of gas lay undiscovered within the Guyana–Suriname borders. Presently, the Calcutta and Tambaredjo fields, onshore Suriname, are the only producing assets within the basin. To date, over 30 wells have been drilled offshore; however there have been no commercial discoveries made. Source rock has been identified but the greatest risk, in our view, is migration for many of the plays.
Government Take: E&P activities in Guyana and Suriname are governed by Production Sharing Agreements (PSC), while activities in French Guiana are governed by a Concession model. In Guyana, operators are allowed to recover all capital and operating costs from cost oil (up to 75% of production for the first three years and up to 65% thereafter), the operators share of the profit oil is 50% for the first 40,000bopd and subsequently declines with increasing production to 45%. Similarly, in Suriname companies are allowed to recover all capital and operating costs from cost oil (up to 70% of production). In addition, operators in Suriname are obliged to pay a royalty equivalent to 6.25% of gross production value and corporate tax at a rate of 36%. In French Guiana, the royalty rates are dependent on the production volumes; as production volumes increase, operators are obliged to make higher royalty contributions. Also, operators are expected to pay corporate tax at a rate of 23%. We estimate that a barrel of oil produced in French Guiana is worth ~$10/boe; for Guyana, we estimate a value of ~$7 ‐~$8/boe produced and for Suriname, we estimate a value of $2.5/boe produced. Our estimates are based on a $90/barrel oil price.
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The Guianas: Opportunity & Reward
Resource Potential (USGS Estimates)
Contractor Take in a Regional Context
Argentina ‐ 4,722mmboe
Brazil ‐ 17,032mmboe
Bolivia ‐ 4,175mmboe
Colombia ‐ 2,090mmboe
Ecuador ‐ 6,518mmboe
Peru ‐ 2,986mmboe
Trinidad & Tobago ‐ 3,389mmboe
Venezuela ‐ 205,639mmboe
The Guianas Undiscovered Resources (USGS) ‐15,700mmboe
0% 10% 20% 30% 40% 50% 60% 70%
French Guiana
Peru
Guyana
Argentina
Colombia
Brazil
Suriname
Venezuala
Source: W
ood Mackenzie, TPH
Source: B
P, USG
S, TPH
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The Guianas: Universe of Opportunities
Tullow (TLW: LN): Tullow has interests in various assets within the Guyana‐Suriname basin. In French Guiana, Tullow has a 27.5% interest in the ~8mm acre Guyane Maritime block. In Guyana, Tullow has a 30% in the Georgetown license. Onshore Suriname, the company owns a 40% working interest and a 36.5% economic interest in the Coronie and Uitkijk blocks. Offshore Suriname, Tullow has a 100% interest in Block 47. 2011 will see Tullow test several prospects in the region. In addition to the Jaguar‐1 prospect, Tullow is also testing the Zaedyus prospect within the Guyane Maritime block; the Zaedyus well was spud during the first quarter of 2011. The prospect is targeting a 700mmbbl (P10 estimate) structure (TPHe 500mmbl). We feel the biggest risk to the Zaedyus prospect will be migration given the structure’s distance from the known source. If successful, the play could open up a frontier basin for the company. Tullow is also committed to drilling five wells within its Coronie onshore block. The Coronie drilling campaign is expected to begin in the second quarter of 2011. In 2008, Tullow drilled five wells within its Uitkijk onshore block; results from the campaign have been reviewed and integrated into the regional database.
Canacol (CNE: CN): Canacol has a 65% working interest in 1.85mm gross acres within Guyana’s onshore Takutu basin. In December 2010, the company and its partners, Groundstar Resources and Sagres, spud the K‐2 (Karanambu‐2) well. In 1982, Home Oil successfully drilled the K‐1 (Karanambu‐1) well which yielded a flow of ~400bopd (42o API) during well tests. The K‐2 well is located 600m away from the K‐1 well; Canacol and its partners are drilling the K‐2 well to a depth of 11,000ft and are targeting the same reservoirs that Home Oil targeted with the K‐1 well. Gaffney, Cline and Associates attributes gross mean recoverable prospective resources of 128mmbbl to the Karanambu prospect (~100mmbl TPHe) and gross mean recoverable prospective resources of 171mmbbl and 133mmbbl to the Rewa and Pirara prospects respectively. This is a fractured volcanic reservoir and therefore contacting fractures is extremely important towards a successful well test but given previous discover we estimate a 90% geological chance of success (in line with appraisal models)
CGX (OYL: CN): CGX is exclusively focused on Guyana, with interests in three offshore licences within the Guyana‐Suriname basin. The company is the sole participant in the 2.3mm acre Corentyne and 2.8mm acre Pomeroon licenses and owns a 25% interest in the 1.7mm acre Georgetown license. CGX expects to make well commitments for its Corentyne license in 2011. The company and its partners have also announced that the Jaguar‐1 well within the Georgetown license will be drilled in June 2011. Jaguar‐1 will be drilled to a total depth of ~21,000ft and will test a 700mmbbl P10 (TPHe 500mmbl) Turonian prospect. Exploration activities relating to the Pomeroon license have been postponed due to a border dispute between Guyana and Venezuela.
Repsol YPF (REP: SM): Repsol and its subsidiary, YPF, have a combined interests of 45% in the in the Georgetown licence. In addition to its Guyana assets, Repsol YPF also owns a 40% interest in the ~1.4mm acre Block 30, offshore Suriname. In 2008, Repsol unsuccessfully drilled the West Tapir well within the block. Drilled in ~300ft of water and to a total depth of 12,700ft, the well did not encounter commercial quantities of hydrocarbons.
Noble Energy (NBL: US): Noble energy currently holds a 45% stake in Block 30 offshore Suriname. As stated previously, Repsol YPF owns a 40% stake in the block; the balance is owned by Petro‐Hunt, a privately held independent E&P company.
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Groundstar (GSA: CN): Groundstar Resources has a 10% carried interest in the Takutu basin block (same assets as Canacol and Sagres), onshore Guyana.
Exxon Mobil (XOM: US): Exxon Mobil has a 75% interest in the Stabroek block, offshore Guyana. The block lies within 650ft to 10,000ft of water and covers ~15mm acres. The company has not made any announcements about planned drilling activities.
Inpex (1605: JP): In 2007, an Inpex subsidiary, Teikoku Oil, acquired a 35% interest in Block 31 offshore Suriname. The block covers an area of ~ 3.5mm acres and lies in water depths that range from ~65ft to ~430ft. The company plans to spud its first well offshore Suriname in the second quarter of 2011.
Key Petroleum (KEY: AU): The company, through its 50% ownership of non‐listed Portsea Oil and Gas NL, has a free carried interest of 1.75% in the Tullow operated Coronie and Uitkijk blocks, onshore Suriname. The third participant in the blocks is the Surinamese government owned Paradise Oil, with a 60% interest.
Maersk (MAERSKA: DC): The company has a 65% non‐operated working interest in the Inpex operated Block 31, offshore Suriname.
Murphy Oil (MUR: US): Murphy has a 100% interest in Block 37, offshore Suriname. The block covers an area of 2.1mm acres and lies in water depths that range from 160ft to 1,000ft. In November 2010, Murphy spud the Caracara well, offshore Suriname. The well, which was targeting a 120mmbbl to 1,030mmbbl prospect, was unsuccessful. Murphy has one more prospect to test in the near term. The company intends to spud the Aracari well, targeting a 200mmbbl to 500mmbbl structure.
Northern Petroleum (NOP: LN): Northern Petroleum is a minority participant in the Tullow operated Guyane Maritime block. The company, through its 50% holding in Northpet Investments Limited, has a 1.25% interest in the block.
Sagres (SGI: CN): Sagres owns a 25% working interest in the Takutu basin block (same assets as Canacol and Groundstar), onshore Guyana.
Shell (RDSA: LN): Shell is exposed to the Guyana‐Suriname basin through its interest in the Guyane Maritime block in French Guiana and its interest in Exxon Mobil’s Stabroek concession offshore Guyana. Shell currently has a 33% interest in the Guyane Maritime block; the company has announced its intention to increase its interest to 45%, subject to regulatory approval. In Guyana, the company has a 25% interest in the Stabroek concession.
Total (FP: FP): In 2009, Total acquired a 25% interest in the Tullow operated Guyane Maritime block. The acquisition is subject to regulatory approval.
Wessex Exploration (WX/P:LN): Wessex Exploration, through its 50% holding in Northpet Investments Limited, has a 1.25% working interest in the Tullow operated Guyana Maritime Block.
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The West African Analogy
At the onset of the Aptian age, 122Ma, South America and Africa began to drift apart. By the Cenomanian/Turonian age, 93Ma, both continents were completely separated. As a consequence, there are identifiable analogies between the West African offshore petroleum system and the Guyana‐Suriname offshore petroleum system. In particular, both basins demonstrate strong similarities with regards to source, timing, burial, compaction and trap mechanisms. Tullow, already successful across West Africa, intends to extend proven West African plays to South America. The company is targeting a number of Turonian Turbidite fan structures offshore the Guianas, similar to the Jubilee, Tweneboa and Owo structures, offshore Ghana.
However, it is worth noting that there are significant differences between the Guyana‐Suriname and West African basins. Particularly, West African reservoirs are not as deep as the reservoirs in the Guianas. For instance, the Jubilee reservoir is located in a Turonian interval at a depth of ~12,000ft. The Turonian interval in the Guyana – Suriname basin is comparatively deeper, located beneath ~21,000ft of sediment. This difference in depth can cause the reservoirs to have different characteristics. At greater depths, the Turonian reservoirs in the Guianas are likely to have higher temperatures and pressures, resulting in higher reservoir gas – oil ratios and potentially greater compaction. Similarly, reservoirs in the Guianas and West Africa can be expected to have different porosity, permeability, shrinkage and recovery factors.
South America ‐West Africa Drift
Source: Tullow Oil
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The Basins
Guyana‐Suriname Basin
The Guyana‐Suriname Basin, comprising onshore and offshore sections, extends into Venezuela, Guyana, Suriname and French Guiana and is known to contain the Canje Formation ‐ a Late Cretaceous / Cenomanian age oil and gas generating marine source rock. This Canje Formation is similar to the hydrocarbon generating rocks of West Africa, Eastern Venezuela and Trinidad and Tobago1. Furthermore, numerous gas and oil shows as well as up‐dip heavy oil accumulations within Suriname, confirm the presence of an active Hydrocarbon system. Presently, the only producing areas are the onshore Tambaredjo and Calcutta fields. Staatsolie, the Surinamese national oil company, produces 16mbopd from both fields. While onshore has been relatively explored with over 1,260 wells drilled, offshore is considerably underexplored. Just over 30 wells have been drilled; 22 offshore Suriname, ~12 offshore Guyana and 2 offshore French Guiana. Notable wells include Shell’s Abary‐1 well and Elf’s North Coronie‐1 well. Drilled in 1975, the Abary‐1 well encountered light oil (37o API) and gas shows at a depth of ~13,000ft.
Water depths within the basin range from 150ft to over 4,000ft. Plays types include Syn‐Rift, Pre‐Aptian Wedge, Tertiary Carbonate, Tambaredjo/Calcutta Analogue and Transform Fault Plays2. The Transform Fault Plays are analogous to the stratigraphically sealed Turbidite plays along the coast of West Africa. Typical targeted horizons are the Eocene, Cretaceous and Turonian age formations. Gross pay zones across the basin are estimated to range in thickness from ~50ft to ~800ft with rock porosity between 15% and 23%. We estimate shallow wells should cost $30‐$40mm to drill with deeper Turonian targets costing between ~$80‐$100mm (up to 22,000ft) in the offshore section of the basin. In comparison onshore wells in the region should cost between $2‐20mm depending on targeted depth. Participating operators include Exxon Mobil, Inpex, Murphy, Noble, Repsol, Shell,
1 Warren G. Workman, Guyana: A new exploration focus, World Oil, May 2000 2 Staatsolie, Suriname: The Upcoming Oil Province, January 2009
Source: C
GX
Page | 8
Total and Tullow. Below is a map of the Guyana – Suriname basin showing the basin’s hydrocarbon source kitchen.
Takutu
Takutu is an onshore basin that extends into Guyanese and Brazilian territory. The Guyanese section covers an area of 10,000km2 and is up to 18,000ft deep is some places. According to Wood Mackenzie, only five wells have been drilled to date, three in Guyana and two in Brazil. With the exception of Home Oil’s Karanambu‐1 well, which flowed at 400bopd, all other wells drilled have resulted in dry holes. The results of Home Oil’s Karanambu‐1 well indicate that the Apoteri horizon has excellent trap and conduit potential. The main source rock has been identified as the Manari Formation. Canacol and its partners, Groundstar Resources and Sagres Energy, are currently targeting the Apoteri horizon at the Early Jurassic/Late Triassic interval and the Takutu formation at the Cretaceous/Middle‐Late Jurassic interval. The main risk to this play type will be uncertainty over reservoir quality (fractured volcanic).
Source: C
GX
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Basin Summary
The table below contains a summary of the features of key basins within the Guianas:
Basin Location
Indicative No. of Wells Drilled
Current Production (mbopd)
Crude API
Participants Targets ~Net Pay (ft.)
Typical Play
Guyana ‐ Suriname
Offshore >30 n.a n.a
CGX, Exxon, Inpex, Murphy, Noble, Northern Pet., Repsol, Shell, Total,
Tullow, Wessex Pet.
Eocene, Cretaceous (Turonian) formations
50 ‐ 800
Syn‐Rift, Pre‐Aptian Wedge, Tertiary
Carbonate, Tambaredjo/Calcutta
Analogue & Transform Fault
Plays
Guyana ‐ Suriname
Onshore >1,260 16,000 15.8o
On Energy, Key Pet., Paradise
Oil, (Staatsolie), Tullow,
Eocene, Cretaceous (Turonian) formations
50 ‐ 800
Syn‐Rift, Pre‐Aptian Wedge, Tertiary
Carbonate, Tambaredjo/Calcutta
Analogue & Transform Fault Plays
Takutu Onshore 5 n.a n.a
Canacol, Groundstar Resources, Sagres
Cretaceous, Jurassic & Late Triassic formations
60 ‐ 125
Fractured Volcanic Play
Source: CGX, Hunt Oil, Staatsolie, TPH
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The Guianas: Past and Future Prospects
West Tapir (Suriname): The 70mmboe ‐ 170mmboe West Tapir prospect was drilled, offshore Suriname, by partners ‐ Noble, Petro‐Hunt and Repsol in 2008. Located in Block 30, the well was drilled in 300ft of water and to a depth of ~10,000ft. Repsol, the operator of the well, targeted an Oligocene/Eocene stage tertiary formation. Although this is the same interval that holds the oil producing Calcutta field, onshore Suriname, the well was abandoned by Repsol and its partners, as it did not contain commercial quantities of hydrocarbons. Repsol did not release the West Tapir well results; however, the results of Elf’s 1975 North Coronie – 1 well provide some information about the geologic conditions within Block 30. North Coronie – 1,~20km north east of the West Tapir prospect, was drilled to a depth of ~18,000ft, penetrating ~1000ft of organic rich source rock in the Turonian interval and ~150ft of reservoir quality sands in a Late Cretaceous Turbidite structure3. These results reduce the risk associated with Turonian and later age prospects within the basin.
Caracara (Suriname): The 120mmboe ‐ 1,030mmboe Caracara prospect was spud late last year by Murphy. The company found good quality reservoirs, but did not find oil. Murphy stated that it encountered 600m of shales with oil shows above its target geologic section, indicating that the prospect was within the hydrocarbon kitchen area. The company has spud the 200 – 550mmbbls Aracari well. Although Aracari is an independent play, it will be drilling a seismic anomaly down dip of the location where the oil shows were encountered. Murphy believes this reduces the seal risk associated with Aracari, as the shale should provide an up dip seal for the targeted formation. Murphy also has other
3 J. Birnie and P.Geoph, Geology & Prospectively of CGX Energy Inc.’s Oil & Gas Exploration Concessions in Guyana – Guyana‐ Suriname Basin, Northeast South America, May 2004.
Source: Staatsolie, TPH
Source: M
urph
y Oil
Page | 11
prospects within Block 37; the company will decide on further drilling activity after evaluating results of the Caracara and Aracari wells.
Zaedyus (French Guiana): Tullow and its partners, Shell and Total, contracted the ENSCO 8503 semi‐submersible rig to drill the Zaedyus prospect, offshore French Guiana. Tullow, the block operator, spud the well in the first quarter of 2011. The company estimates the target structure may contain 700mmbl (P10 estimate) of prospective resources. The company is targeting a Turbidite structure at the Cenomanian/Turonian interval; the same interval that holds the Canje formation – the basins source rock. Although the results of Elf’s North Coronie – 1 well reduce the overall risk associated with Turonian prospects, the Zaedyus prospect has a considerably high source and migration risk as it is over 200km away from the basin’s proven source rock. Furthermore, results of the other two wells drilled offshore French Guiana are not encouraging. In 1975, Elf’s Sinnamary ‐ 1 intersected granite sandstones at a depth of ~6,900ft while Esso’s 1978 FG2‐1 well, located within Tullow’s Guyane Maritime Block, intersected a Cretaceous Basalt Basement at a depth of ~13,000ft; neither well encountered Hydrocarbons4.
Jaguar – 1 (Guyana): The Jaguar ‐1 prospect is located in the Repsol operated Georgetown block. Other participants in the block are CGX Energy and Tullow. The partners expect to spud the well in the third quarter of 2011. Tullow estimates the target structure may contain 700mmboe of P10 resources. The Jaguar prospect will be drilled to a depth of ~21,000ft and will be targeting a Turonian age interval. Broadly, Turonian prospects within the Guyana‐Suriname basin are considered to have higher probabilities of success. Gustavson Associates estimates that a
4 D.T Shaw and J.D.M Roberts, “An Independent Assessment of Wessex Exploration plc.” November 2009.
Source: Tullow Oil
Source: C
GX, TPH
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Turonian Prospect within the basin will have a maximum probability of success of 57.6%5 (TPHe is 13% COS in line with frontier basin model). Overall, the results of historical drilling activity within the Georgetown block have been mixed. In 1975, Shell drilled the Abary‐1 well within the block. Although the well was abandoned (due to overpressuring) before reaching its target depth of ~15,000ft, oil shows were encountered at ~9,800ft. Furthermore, the well flowed ~3,400 barrels of fluid per day with associated light crude (37oAPI) at ~13,000ft before experiencing a blowout in a deeper horizon. More recently, Total drilled the Arapaima ‐1 well (1990) within the Georgetown block; the well was not commercial.
Eagle (Guyana): CGX is the sole participant in Guyana’s offshore Corentyne Licence. In 2000, following its eviction from the disputed territory, CGX drilled its third ranked prospect, the Horseshoe West ‐1 well, within the Corentyne block. The well was unsuccessful due to the absence of a shale seal. CGX plans to spud the multi‐target Eagle prospect in 2011. Initial drilling will be targeting a Turbidite structure at the Eocene interval. Gustavson Associates estimates that the structure may contain 300mmbbl of P50 resources. However, Eagle’s primary targets are a 1.2Bbbl Upper Turonian prospect (TPHe 500mmbls) and a 1.3Bbbl Lower Turonian prospect (TPHe 500mmbls). Positive results from Jaguar‐1 will significantly de‐risk the Eagle prospect, as the Jaguar‐1 prospect (less than 50km from the Eagle Prospect) and is also targeting a Turonian age interval. The company is currently looking to farm down a portion of this well (TPH expects shallow formation farm down to hold the well).
Aitkanti (Suriname): The Aitkanti prospect is located in Block 31, offshore Suriname. Block participants, Inpex and Maersk, aim to commence drilling in the second quarter of 2011. The well will be targeting an Albian Carbonate interval, directly beneath the basin’s Cenomanian Canje source rock. The Aitkanti prospect is analogous to OGX’s Aptian/Barremian Campos basin discovery, offshore Brazil.
Karanambu‐2 (Onshore Guyana): See Canacol discussion (page 4).
5 Gustavson Associates, Resource Evaluation Report on the Corentyne Petroleum Prospecting Licence, Guyana ‐ South America, February 2010.
Source: C
GX, TPH
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Prospect sizes and chance of success
In estimating the prospect sizes for the three main Turonian targets that are likely to be tested this year or early next year, we have taken a detailed look at the parameters which influence the estimation of resources in place. For the Jaguar and Zaedyus prospects, Tullow released P10 resource estimates of 700mmboe respectively (this translates to an implied P50 estimate of 200mmboe). For the Eagle prospect’s upper and lower Turonian targets, CGX released P50 resource estimates of 1,269mmboe and 1,241mmboe respectively. There is a marked variation in the prospect sizes released by the companies, given that both the Eagle and Jaguar prospects appear to have similar areal extents (~20,000 acres).
A recent reserve report, commissioned by CGX, provides some information about the assumptions behind the company’s estimates. For the Eagle prospect, the company has used a porosity range of 15%‐20%, based on the North Coronie well and a related water saturation of 20%. Also CGX has used a mean oil formation volume factor (Bo) of ~1.55 and a recovery factor of 20%. CGX has assumed a net pay of 345 feet for the Upper Turonian and 444 feet for the Lower Turonian. Conversely, we believe a credible analogue to the Eagle and Jaguar prospects is Ghana’s the Jubilee field. Jubilee has thick good quality sands with 130‐330 feet of net oil pay, excellent rock quality with 20%+ porosity. The Jubilee field has a primary depletion factor of 5% ‐ 15% with a water flood assumption of 20‐55%. The field has a surface area of ~20,000 acres, a P50 recoverable resource estimate of 1Bbbls and recoverable reserves of between 370‐700mbbls.
In arriving at out our Turonian prospect size estimates, we have assumed an areal extent of 20,000 acres and net pay of 175ft (taking a more conservative view given the lack of well data) while maintaining the same reservoir characteristics used by CGX. This gives us approximate prospect sizes of ~500mmboe. The analysis gives an indication of the likely resources in place in the event of a successful well. In the table below we show the potential size of the fields based on various areal extent and net pay combinations.
CGX gives a wide range of probability of success for the Eagle prospect, between 7.8% and 58%. This is based on 45% ‐ 90% chance of success range for presence of stratigraphic trap a 50‐80% chance of having a good shale seal and the same probability of having reservoir with confidence from the North Coronie well. The prospects have a high chance of encountering hydrocarbons, between 70% and 100%, based on RSI’s (Rock Solid Images) inversion analysis, which inferred the presence of hydrocarbons directly above thermally mature oil prone source beds. In terms of probability of success we are using 20% for the Eagle and Jaguar Turonian prospects but a lower chance of success, 15%, for the Zaedyus well. In our view, a further risk with the Zaedyus well (situated in French Guiana) is migration, given that the prospect is over 200km away from the source kitchen, whereas Jaguar and Eagle are above the source.
Areal extent (acres)5000 10000 25000 50000
25 17 34 86 172Net pay 50 34 69 172 345(feet) 100 69 138 345 690
250 172 345 862 1724500 345 690 1724 3448
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The Regional Activity Map
Planned Well Locations
Historical Well Locations
Source: CGX, TPH
Source: CGX, TPH
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The Guianas: Drilling Activity Summary
The table below contains a summary of planned drilling activity within the Guianas:
Basin Location Country/ Territory
Prospect Participants ProspectSize
Spud Date Target Depth
(ft.)
Guyana‐Suriname Basin
Offshore Guyana Jaguar‐1
(Georgetown License)
CGX (25%), Repsol & YPF (45%), Tullow
(30%)
500mmboe* Q3 2011 ~21,000
Guyana‐Suriname Basin
Offshore French Guiana
Zaedyus (Guyane
Maritime Block)
Northern Pet. (1.25%), Shell (45%), Total (25%), Tullow
(27.5%), Wessex Pet. (1.25%).
500mmbbls* In Progress >13,000*
Guyana‐Suriname Basin
Offshore Guyana Eagle
(Corentyne License)
CGX (100%) 300mmbbl** 2011
11,500
Guyana‐Suriname Basin
Offshore Guyana Aitkanti Block 31
Inpex (35%), Maersk (65%)
‐ Q2 2011 >18,000*
Guyana‐Suriname Basin
Offshore Suriname Aracari
(Block 37) Murphy Oil (100%)
200mmbbls‐ 500mmbbls**
In Progress >11,500*
Takutu Onshore Guyana Karanambu‐2
Canacol (65%), Groundstar (10%), Sagres
(25%)
100mmbbls* Dec 2010 11,000
Guyana‐Suriname Basin
Onshore Suriname Coronie
Tullow (40%), Paradise Oil (60%) , Key Petroleum
(1.75% ‐ free)
250mmbbls** Q2 2011 ~21,000*
*TPH estimate/**Company Estimates
Source: CGX, M
urph
y, Can
acol, TPH
, Tullow
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The Macro View
French Guiana, Guyana and Suriname are economically and politically heterogeneous. As stated previously, French Guiana is not a country, but an overseas region of France. As such, it has the same political structures as mainland France. Its head of state is the President of France and it is represented at the French National Assembly. Local administration of the region is overseen by a “Prefect” appointed by the President of France. It is also interesting to note that French Guiana is a part of the European Union. Guyana and Suriname, in contrast, are self‐governing states with locally elected heads of government. Economically, French Guiana is almost entirely dependent on direct subsidies from mainland France; key economic activities include fishing and forestry. Guyana has a comparatively independent economy. Guyana is a commodity based economy; principal exports include Bauxite, Sugar, Gold, Timber, Shrimp and Rice. Similarly, Suriname also has a commodity based economy; its main exports are Alumina, Gold and Oil. In addition, Suriname receives a significant amount of assistance from the Netherlands. The table below provides a political and economic overview of the Guianas and its constituent territories.
Industry Regulation & State Participation: Although exploration activities in region began in the early part of the last century with the first well in Guyana drilled onshore in 19166, the Guianas still has a young hydrocarbon industry. The regions first and only national oil company was created in Suriname in 1980. The regulatory framework for each territory within the region is discussed below:
French Guiana: As a part of France, the hydrocarbon industry in French Guiana is regulated by the French Government.
Guyana: The hydrocarbon industry in Guyana is regulated by the Petroleum Division of the
Guyana Geology & Mines Commission (GGMC). The division is responsible for negotiating exploration contracts and overseeing exploration activities.
Suriname: In 1980, the government of Suriname established Staatsolie Maatschappij Suriname
N.V, as a state oil company. In addition to being an active integrated energy company, Staatsolie is responsible for awarding petroleum contracts to third parties as well as supervising the execution of petroleum contracts within Suriname. Contracts are awarded through direct negotiations or through competitive bidding rounds. Staatsolie currently produces 16mbopd from the onshore section of the Guyana‐Suriname basin. The company also owns and operates a 7mbopd heavy oil refinery and a 14MW co‐generation power plant.
6 Wood Mackenzie, Guyana: On the brink of exploration success, November 2008
Country/Region French Guiana Guyana Suriname Former Name ‐ British Guiana Dutch Guiana Capital Cayenne Georgetown Paramaribo Official Language French English Dutch Population 220,000 762,498 519,740 GDP ($mm) 2,310 1,159 3,033 Currency Euro Guyanese Dollar Surinamese Dollar Legal System Civil Law Common Law Civil Law
Source: World Bank, UN, INSEE (2008/2009 estimates)
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Capital Markets: The Guianas have relatively underdeveloped capital markets. Currently, there are two stock markets in the Guianas, the Suriname and Guyana exchanges. The Guyana stock exchange (Guyana Association of Securities Companies and Intermediaries Inc. – GASCI) was created in 2003. As of June 2010, the GASCI comprised fourteen listed companies, with a total market capitalisation of ~$328mm7. The Suriname Stock Exchange (SEB) was established in 1996. At the end of 2009, the exchange comprised eleven companies and had a trading volume of $71,000 per annum8.
Financial Markets: Monetary authority in French Guiana is exercised by Banque de France and the European Central Bank. In Guyana, the Bank of Guyana is charged with formulating and implementing monetary policy, with the objective of achieving and maintaining price stability. The Bank of Guyana is also responsible for regulating the country’s financial industry and issuing currency. Similarly, the Central Bank of Suriname (Centrale Bank van Suriname) is responsible for overseeing the country’s financial industry, issuing currency and maintaining price stability.
Infrastructure: There is limited availability of hydrocarbon related infrastructure in the Guianas. Currently, the regions only refinery is Staatsolie’s 7mbopd heavy oil refinery in Suriname. Canacol, a company currently drilling for oil onshore Guyana, estimates it would cost ~$200mm to build a 120km pipeline to transport crude from the Takutu basin, where the company’s block is located, to Georgetown for export. Lack of infrastructure will create constraints to commerciality onshore. For offshore development we envision an FPSO off take with fixed well head platform completions.
Investment Climate: Each territory within the region strives to attract Foreign Direct Investment (FDI). As French Guiana is legally a part of France, investors in the territory can expect to have the same level of protection that exists in mainland France. In Guyana, the government of Guyana established the Guyana Office for Investment (GO – Invest) to serve as a “one‐stop shop” for investors. The government also passed the Guyana Investment Act of 2004. The law was designed to stimulate economic development by attracting foreign capital. Guyana’s monetary authorities do not restrict inflows or repatriation of funds9. Similarly, the government of Suriname welcomes FDI. Although there are no special investment laws to facilitate FDI, the government routinely grants incentives for large multi‐million dollar investments. The currency is fully convertible; however investors require the permission of the Foreign Exchange Commission to transfer funds out of Suriname10. In the 2011 “Doing Business Report”, the International Finance Corporation (IFC) ranked France 26th, Guyana 100th and Suriname 161st out of a 183 countries. The rankings are based on several factors including the degree to which contracts are enforced in a country and the level of protection given to investors. Suriname performs poorly by both measures; the country is ranked 178th for the enforceability of contracts and 180th for the level of protection it provides for investors.
7 Financial Standards Foundation, Country Brief Guyana, July 2010 8 Caribbean Financial Action Task Force, Anti‐Money Laundering and Combating the Financing of Terrorism, Suriname, November 2009 9 U.S Bureau of Economic, Energy and Business Affairs, 2009 Investment Climate Statement – Guyana , 2009 10 U.S Bureau of Economic, Energy and Business Affairs, 2009 Investment Climate Statement – Suriname , 2010
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