Member Info for Exploration

Thanks SouthEast18

The early wells on Blocks 41/5 & 41/10 were located on structural highs mapped using 3D seismic on the ‘BPU’ - Base Permian Unconformity’ - and the reservoir objective was the underlying Carboniferous sandstones trapped in large pre-Permian anticlines, which turned out to be impermeable, but gas bearing. There were signs of gas in the overlying Zechstein (Permian) sequence which, at the time, was viewed by geologists as the ‘seal’ of the trap. But drillers viewed the Zechstein interval as a drilling hazard and got through it using heavy mud to avoid gas kicks - just like happened in 41/5-1, which almost blew out when 2000 bels of mud suddenly disappeared into fractured Haupdolomite.

Meanwhile, some years earlier in the Netherlands, Shell/Exxon (NAM) made the biggest ‘accidental’ discovery in Europe while drilling a Zechstein prospect near Groningen. When the Zechstein prospect proved to be dry, they continued drilling to what they hoped would be a Carboniferous reservoir, only to find the early Permian Rotliegendes (=Leman) sandstones full of gas. This triggered the scramble to licence and drill the Southern North Sea and exploit the new play.

Shell/Exxon (NAM) followed up in the Netherlands with a systematic exploration campaign of the Zechstein sequence in the Dalen area and perfected drilling into fractured dolomites using coiled tubing, under-balanced techniques which yielded 4 TCF of gas. H2S was also present, which is common in many carbonate reservoirs which lack iron content to react with the H2S in ‘God’s underground geochemical factory’. Since under-balanced drilling requires gas to flow to surface while drilling, NAM also developed mobile de-sulphurisation equipment - quite an achievement.

See page 146 of Cluff’s 2015 CPR for map of Shell’s Zechstein gas field in Netherlands.

https://www.rns-pdf.londonstockexchange.com/rns/7920H_-2015-12-2.pdf

Putting all this together, my guess is that Shell sees an opportunity not so much in the basic geology in P2252, but rather in the application of their technology/experience in what could become a new play in the North Sea. Deltic have been very tight lipped about how they plan to drill the Pensacola prospect and the precise nature of the prospect itself, and I don’t blame them. But they are bound by the confidentiality of their JOA with Shell, so can’t say much without Shell’s approval.

SouthEast18

The findings of the well on Pensacola will take time to emerge.

Although more work has been done in area around P2252 the facts suggest the area is characterised by low porosity/low permeability Main (‘Haup’) Dolomite. Indeed, the three dry wells in P2252 found exactly that. While the geological chance of success is good, discovering several cubic kilometres very tight, gas-charged dolomite is also possible - as shown at West Newton onshore and ~70 unproductive wells over the years exploring the magnesian dolomites in Yorkshire.

While deliberately exploring for fractured dolomite helps, it usually doesn’t completely overcome the fundamental disadvantage of a very tight reservoir matrix. But every exploration well is full of surprises and any immediate euphoria should be tempered by waiting for well flow test results. However, as GeoChem posted recently, flow tests are highly regulated in the North Sea nowadays and we could be waiting some time for definitive news which tell us whether a discovery on P2252 is commercial and worth appraisal and development. I hope Shell’s deal with Deltic includes any testing costs.

And let's not forget, the UK government has revealed that a licensing round for new North Sea oil and gas projects is planned to launch this Autumn. Irrespective of the Pensacola well outcome, Shell and Deltic may downplay a successful result and keep sensitive technical information to themselves, as competition for new licences may be intense and the 'herd instinct' comes into play.

Also, according to a government statement, a new task force will provide ‘bespoke support’ to new developments, “recognising the importance of these fuels to the transition and to our energy security, and that producing gas in the UK has a lower carbon footprint than imported from abroad”. This suggests favourable financial encouragement may be on the cards, attracting even more interest from explorers - and hopefully Pensacola and Deltic’s wider portfolio.

https://www.simwellresources.com/p2332

Good news from the technical team looking for oil in Turkey.

They demonstrated UKOG’s Forked Rod equipment to experts from Aladdin but it failed to vibrate which suggested there is no oil underground.

Luckily, Aladdin’s team had brought a lamp with them (‘Aladdin’s Lamp’) and handed it over to UKOG’s specialists to rub vigorously. A powerful genie emerged from the lamp and told them he had injected 100 million barrels of oil into the Basur reservoir.

Ali Baba, an associate of the forty thieves running the project in UK, believes the genie had actually put too much oil into the reservoir and it overflowed into seismic shot holes.

Good news about Selene. Sub-commercial gas was discovered years ago on the structure in very tight Leman sandstone, but what makes it more attractive today?

Historically, geologists had written off the Leman reservoir in the Sole Pit area due to low permeability (0.1 mD) caused by deep burial and secondary mineralisation.

But 35 years of drilling on the adjacent Ensign Gas Field is a good analogue for what can be achieved by drilling and completion technology at Selene. See link below.

Staged fracs from horizontal wells have made dramatic improvements to well performance. And now there is an offshore fracking service capable of delivering enormous volumes of proppant and fluid, it is cost-effective.

Shell is well aware of this and deployed similar approach on Clipper South area to rejuvenate gas fields.

https://cupdf.com/document/ensign-unravelling-the-enigma-devex-ensign-unravelling-the-enigma-ensign.html?page=10

Ocelot

Good point about patents. As I understand it UKOG’s technology is proprietary and highly confidential. But it does rely on the skill and reaction of the expert holding the Forked Rod.

I wonder if SS tested it himself holding UKOG’s Forked Rod at Horse Hill. The results should have been characterized by his rapid, repeated hip thrusts and shaking of the buttocks, especially while squatting.

If tried at Loxley it probably produced nothing more than twitch (i.e. nothing there) and led to the decision to farm out such a risky venture.

Ocelot - did you hear latest?

The technical team will deploy cutting edge instruments to pinpoint a drilling location in Turkey.

This is a forked rod that, in the hands of a expert is said to indicate - by means of spasmodic movements of varying intensity - the presence of water and oil under-ground.

A source close to the work said “we’ve tried everything to locate commercial petroleum over the last decade and this new technology promises to transform the company”

Ocelot

If UKOG had bothered to look into competitors plans they'd have realised the Portland storage fantasy was outclassed by Exxon's plans at Fawley. Exxon has deepwater terminals which can be re-developed to receive LNG and massive brown-field site. UKOG's scheme is a non-starter and now SS has realised that. What next? UKOG to supply hydrogen to fuel SpaceX Mars rocket.

Penguins

The 'Southampton' thing is SS's attempt to gatecrash Exxon's big plans to re-purpose Fawley over coming years.

Exxon is reputedly teaming up with a CCS specialist to gather the area's CO2 and dispose of it. One idea is to reverse the Wytch Farm pipeline and store CO2 in the depleted Sherwood Reservoir.

https://fueloilnews.co.uk/2021/12/deal-could-see-key-hydrogen-role-for-fawley/

Rich3648

Good points. What does it really take to make a living from an oilfield producing a few tens of barrels per day?

Well, in Texas this requires what they call a ‘poor boy’ approach using makeshift or home made equipment - typically operated by one or two men. No management, a couple of adjustable spanners, a sledgehammer and an old pick-up truck.

The main point is that even with ‘light touch’ regulations such as in L48, running a small oil production company is hard manual work the likes of which SS is totally unfamiliar.

One enterprising Texan operator named Zach has gained a YouTube following with a series of videos showing how it’s done. A few example links below - there are lots more. If nothing else, its more entertaining than UKOG’s share price.

Take note SS - Zach is after your job!

How a home-made service rig works; https://youtu.be/nVmnZIDwpx0

How an oil/Water separator works; https://youtu.be/uFPVAuXstdY

Maintaining an old oil well; https://youtu.be/evmuD06nlT0

Penguins,

Good points on AVO but it is fundamentally limited use around Loxley because the supposed Portland sandstone reservoir is relatively shallow. Here’s why - there are two reasons.

Firstly, seismic equipment limitations; When Conoco was exploring the central Weald in the early 1980s there was only one Vibroseis seismic crew active, run by CGG. Their equipment was set up for 48-channel recording into a split spread with shot and receiver intervals of 50 metres which yielded 24-fold multiplicity below 600 msec TWT. In other words the maximum offset was 1200m and, apart from the usual missed shots, the muting of ground roll eliminated longer offset reflections. So AVO analysis wouldn’t work.

Secondly, at the time of seismic acquisition the main objective was oil in Middle Jurassic Bathonian oolites with traps in tilted fault blocks. The younger Portland-age reservoir was written off as non-commercial, especially after the disappointing outcome of Godley Bridge. But the simple seismic equipment was ideal, cost-effective for the Middle Jurassic play with production of over 10km on a good day. The average cost/km was in the region of $1500 per km for acquisition and $500 per km for processing.

Lastly, UKOG is knowingly drilling Loxley based on maps made from seismic with superficial static corrections. i.e. no upholes nor detailed LVL surveys which Conoco only adopted a couple of years after drilling at Godley Bridge using a land airgun energy source recording into a short refraction spread of detectors.

Bearing in mind just getting planning permission has cost so much time and money one would have expected a better technical case.

FD

Enterprise Management Incentives (EMIs) are the new thing;

A company with assets of £30 million or less can offer Enterprise Management Incentives (EMIs).

The company can grant share options up to the value of £250,000 per individual in a 3-year period.

The recipient does not have to pay Income Tax or National Insurance if they buy the shares for at least the market value they had when you were granted the option.

If the recipient was given a discount on the market value, they have to pay Income Tax or National Insurance on the difference between what what they paid and what the shares were worth.

The recipient can avoidCapital Gains Tax if they sell the shares by offsetting the gain against the company's corporation tax.

Another 'snout in the trough' scheme?

An interesting video - link below - about the Zechstein Haupdolomite reservoir from Draupner Energy who administer licences to north and east of Deltic’s core area.

https://youtu.be/fyH_nWBrin0

It’s no surprise they make the point that finding gas is only part of the challenge exploring carbonate reservoirs, but locating large areas with decent porosity and permeability capable of flowing petroleum is equally important.

https://draupnerenergy.com

under balanced zechstein drilling in Netherlands. see link. Note NAM allows wells to flow while drilling.

https://www.searchanddiscovery.com/abstracts/pdf/2003/intl/extend/ndx_83739.pdf

Drilling through formation with salt stringers is usually done with OBM

Penguins

I don’t think UKOG will ever deliver gas to UK’s National Transmission System - assuming gas is actually present at Loxley.

First of all, the way UK’s gas infrastructure is operated requires any new gas source to specify Daily Quantities, Annual Quantities,Production Profile and so on. The gas has to meet NTS specification in terms of thermal properties, dryness and lack of inserts like CO2 and H2S.

Secondly, UKOG would have to sign up to the Uniform Network Code which applies to all shippers. The Code governs what happens if, say, a shipper fails to deliver the quantity of gas promised on any given day. So if UKOG under-delivered they would be obliged to make up the difference the next day or pay a financial penalty in what is known as the ‘daily cash-out’. Similarly, gas buyers must take the gas they have contracted to sell to consumers or pay the cash-out if they’ve bought more than they’ve sold. The whole aim is to keep the NTS ‘in balance’ i.e. what goes in must come out.

Thirdly, where is the nearest NTS pipeline? Actually miles away requiring a long connection crossing 100s of Nimby territory. See map link.

https://www.nationalgrid.com/gas-transmission/document/81016/download

In summary, as you say a discovery would require extensive appraisal with years of planning for other sites which could only be located after more detailed seismic.

What to do? Well, even a single well can heat a greenhouse but a better option is use gas to compete in the Short Term Operational Reserve market (STOR). At certain times of the day the power grid may need access to sources of extra power to help manage actual demand on the system being greater than forecast or unforeseen generation unavailability.

The basic requirement for a STOR unit is that it must offer a minimum of 3 MW of steady generation, respond to a request for power within 20 minutes and sustain the response for at least two hours. After ‘switch off’ the unit must be able respond again within 20 hours. As a rule of thumb 1 mmscfd can power five 1 MW reciprocating engine generators, each in its own sound-proof container. Or generate 40 MW using a truck-mounted gas turbine using 8 mmscfd.

Power price? Subject to a monthly auction. One area to bid is ‘standby only’ and get paid just for being ready to switch on. Generators? Rental from companies like Agrekko.

Maybe SS will read this and start promoting it instead of the bonkers hydrogen conversion idea for Loxley.

maverick - I agree.

A potential new owner could be the Neptune/Spirit partnership which operates the Cygnus Gas Field and exports the gas via the Esmond system in Deltic's blocks. Neptune operates the undeveloped Pegasus `West gas discovery in Block 43/13, a stones throw to the west to Deltic's blocks. So when ullage appears in the Esmond system there will be an incentive to drill the clusters of prospects in Deltic's licences and tie back to Cygnus.

Also, let's remember Spirit Energy is the former Centrica Upstream Division spun off when Centrica got out of E&P to focus on their downstream assets. Centrica conducted all the early exploration work in this area using names of galaxies - including Cygnus, Pegasus and Andromeda.

I guess Deltic is now a by-stander while all this is sorted out.

Oilriches

Deltic is effectively gagged from unilateral announcements without agreement from Shell and ~Capricorn.

Under takeover/merger regulations I think Capricorn is restricted in what they can announced until the merger with Tullow is finalised.

Furthermore, Capricorn's technical staff will be wondering whether they still have jobs etc. Maybe Tullow to clear-out Capricorn's management in Scotland and hopefully keep the key techies dealing with the North Sea in a down-sized 'local' office. Tullow's main claim to UKCS expertise is how they have decommissioned various depleted fields.

All we can do is sit back and wait for Shell to tell Deltic what is going on about drilling, followed by an announcement from Deltic. The Deltic licences under Capricorn will remain under wraps for a while.

Maverick - Here’s my take on Capricorn/Tullow.

Current Tullow CEO Rahul Dhir was originally involved in Cairn Energy’s projects in India. Cairn is now called Capricorn.

The success in India triggered a very risky frontier exploration campaign in Greenland and a farm in to Hunt’s acreage in Senegal. Realising Cairn was out its depth, CEO Simon Thompson stopped the frontier exploration and concentrated the company’s work on safer UKCS projects which led to the `Capricorn farm-in to Deltic’s SNS properties - all under Simon `thompson’s leadership.

Meanwhile, Tullow expanded mainly by buying Hardman Resources which was formed by a group of ex-BP geologists who built a substantial portfolio in the 1980s in Africa. In general, Tullow's management became 'too big for their boots' with mega bucks salaries only to be ousted by their board.

Rahul Dhir had broken away from Cairn to found Delonex Energy a few years ago to concentrate on what is known as ‘West Asia’ in India - or 'East Africa' to you and I. Despite substantial backing from Warburg Pincus Delonex failed. Dhir bailed out and landed in the Tullow CEO's seat.

https://www.africaintelligence.com/oil--gas_corporate-strategy/2020/10/07/how-warburg-pincus--prized-delonex-energy-crumbled-under-new-tullow-ceo-s-rule,109611795-eve

As often happens in the petroleum sector, mergers or acquisitions are driven by individuals’ ambitions and now Rahul Dhir has control of his old company, Capricorn, again. It’s a type of virility contest.

Perhaps he will divest Simon Thompson’s efforts to build a ‘safe’ UKCS portfolio and focus on Tullow’s substantial sub-Saharan properties which are core to Tullow’s corporate culture. In effect, Deltic becomes a smaller, less important element in Tullow's portfolio.

ibug

That’s not true. There is a 12-mile limit for fishing etc but also a median line with France - just look at the map of Offshore Oil and Gas blocks in the English Channel. So Crown Estates bovver boys rule OK and its agreed in the UNCLOS Treaty.

But it doesn’t matter - the whole scheme has about as much chance of happening as oil flowing from 0.01md Kimmeridge Micrite or producing gas at Loxley.

If Loxley is drilled it will certainly find oil shows in the Middle Jurassic Cornbrash or Forest Marble which qualifies as a major discovery in UKOG’s geological fantasy world.

ibug

An offshore wind farm requires a licence from Crown Estate.

Even if the Gov’t held a licence competition, applicants must post a £60 million bond. This is intended to prevent ‘shysters’ trying to get involved. And, as you say, this area is busy with coastal traffic, although just outside the main Channel shipping lanes.

Also, planning consent would be needed for the proposed brine disposal wells. Maybe SS will ask Aladdin ME to deal with the drilling or even re-inject the brine at Horse Hill.