Member Info for Exploration

Wizard

The grey ‘tanks’ you refer to are grain silos run by Isle of Wight Grain Storage.

More recently, they have run out of space and plan to build a new facility at Arreton. The silos and drying equipment for the Cowes site will be demolished. Paradoxically, the old silos were built on the site of the former gas works.

It’s a farmers co-operative.When complete ~50,000 tons of grain will be dried and stored generating ~ 15 to 20 HGV movements per day. By using the new site in the centre of the island and tapping in to heat from the nearby plant which generates grid power and heat for the nearby salad greenhouses, the overall net-back to farmers for their grain is increased by about 15%.

https://resource.co/article/foresight-acquires-ad-plant-isle-wight-12759

Here’s some news about UKOG’s friend, MP Bob Seely supporting the project.

https://www.countypress.co.uk/news/16979542.multimillion-pound-plans-for-grain-storage-and-processing-plant-lodged-with-isle-of-wight-council/

Grain from Isle of Wight is marketed by Frontier.

https://www.frontierag.co.uk/grain-marketing/marketing-partnerships/isle-of-wight-grain

Here’s some drone footage of the fuel dock + power station

https://youtu.be/dH3TR-lvgDE

Sorry Stonefold

My mistake - the blades are 82 metres. About 20 metres overhangs the stern and there is a nice little red cover on the blade tip made of trouser material to signify an ‘over-sized’ load.

https://www.williams-shipping.co.uk/williams-shipping-begins-turbine-blade-contract-for-mhi-vestas/

Wouldn’t it be more economical to build a refinery in Arreton, That would pi55 off the locals even more. But when did UKOG ever consider economics.

Stonefold

When the fuel terminal was working normally, petrol and diesel was delivered by the ship called Rix Merlin.

http://www.shipspotting.com/gallery/photo.php?lid=3180229

Here it is leaving Cowes

https://images.app.goo.gl/x7LkRndaNajkXXUY7

Do you think we should buy it too? And why not make an offer for Fawley refinery too.

Stonefold

The vessel on the satellite picture is probably ‘Blade Runner 2’. It is a specialised vessel designed to ship 90m wind turbine blades from the Vestas factory further up the River Medina.

https://www.shipspottersteve.com/blog/mtb-blade-runner-two

The finished blades are taken to the old Fawley power station, offloaded and painted. Thereafter, the blades are reloaded onto cargo ships and taken to wind farms.

Vestas is a big employer on IoW so all the stuff about job-creation at UKOG’s drill site is a bit of a red-herring. As I understand it, many of the industrial jobs on Isle of Wight are high-tech manufacturing in aero-space, radar research and aluminium ship-building - the latter being UK market leader for specialist service vessels for offshore wind-farms.

https://www.bbc.co.uk/news/uk-england-hampshire-45861980

https://www.countypress.co.uk/news/18519698.mhi-vestas-isle-wight-blades-offshore-wind-farm-2021/

Grey Panther - I expect RBD will have looked at the geochemistry of well fluids to understand the source of the gas, but it has to be mid/lower carboniferous Type 2 marine, oil prone which has been over-cooked into gas since there are no Type 3, gas-prone Westphalian source rocks nearby.

The presence of a pump suggests RBD intend to unload the water in the reservoir to create sufficient drawdown at the perforations which will encourage natural flow of gas.

Third Energy tried this on the Kirkham Abbey Formation at Pickering-1, but it failed because there was enough head of pressure in the aquifer to continue to flood the natural fractures before gas could escape from the rock matrix.

https://www.third-energy.com/sites/default/files/Pickering%201%20Fact%20Sheet%20210217%20final.pdf

I'm sure RBD know all this and I hope they succeed, but the odds are on Mother Nature winning the fight.

Grey Panther

On origin of the ‘oil’ column in West Newton

In one of his interviews Dave Bramhill noted the accumulation had more in common with the offshore areas.

The presence of a liquid in West Newton does fit with the regional geology. If you look at Figure 39 in the nerc paper (link below) you can see why.

Max gas generation/emplacement from the Middle and Lower Carboniferous oil-prone Type 2 source rocks took place throughout the Cretaceous and Early Tertiary when deepest burial occurred. At that point the Magnesian Limestones in West Newton were fully charged with a gas phase, and probably highly over-pressured.

Then, within the last 20 million years the whole of the Pennines and mid-North Sea high area was uplifted by perhaps 3000m which reduced the temperature and pressure on the trapped gas. As a result, condensation occurred within the gas reservoirs and, over time, gravity caused the denser condensate to sink below the remaining gas which is what is seen today at WN. The ‘oil’ is actually ‘retrograde condensate’.

http://nora.nerc.ac.uk/id/eprint/516766/1/CR15124.pdf

Testing gas condensate wells really is quite complicated. For example, by testing the gas leg any pressure drawdown could cause condensate ‘banking’ around the wellbore. The liquid phase will fill the pore spaces and prevent the passage of gas. Similarly, when testing oil leg, drawdown below the bubble point causes gas to break out and prevent flow of any liquids.

Once the well is flowing there is a multi-phase fluid at the surface, including formation water. Offshore fields like Breagh solve the problem by using pipelines with multi-phase flow to the shore terminal at Teeside where fluids are separated and treated so gas can be sold to NTS specifications, water is treated for disposal and remaining condensate is delivered to the nearby chemical factory.

Ocelot

Check it out here;

https://www.hg.org/legal-articles/petroleum-affairs-in-turkey-7701

Mirasol

I sense SS is good at statecraft and diplomacy and, apart from the red trousers, will do us well in Turkey.

It’s not all ‘plain sailing’ for UK companies in ~Turkey, but UKOG is working with AME which has a very good reputation and track record. In the case of SLE (below) there was lack of due diligence following by sudden engagement of reverse gear!

IN - September 2013 - San Leon enters Turkey

https://www.investorschronicle.co.uk/2013/09/25/shares/news-and-analysis/san-leon-bets-big-on-turkey-w9UVGBW9tLpvOBAm8hLCFJ/article.html

OUT - April 2014 - San Leon pulls out of Turkey Deal

https://www.ft.com/content/58a66002-c3d2-11e3-870b-00144feabdc0

Mirasol,

I'm rather hoping the City awards points to SS for putting UK onshore on the back burner and not frittering our money away on time consuming, non-material exploration such as Loxley and Isle of Wight.

I hope ‘one thing will lead to another’ for UKOG in Turkey. There is a thriving group of Turkish small independent oil/gas companies underpinned by an excellent, objective local geological diaspora. This concentration generates a free wheeling business environment where opportunities abound.

The hub for all this deal-making is Ankara, because that is where TPAO (state oil co) is located. The regulator, GDPA (General Directorate of Petroleum Affairs), is also based in Ankara and they do all the paperwork associated with the licensing system. For example, if UKOG’s deal with AME provides them with title to the licences, it is GDPA who authorises it to give us equivalent rights to local companies. I hope SS likes hanging around in government offices drinking tea!

Almost all these small companies raise money via farm outs and private investors. They haven’t discovered the free cash-machine called ‘AIM’, nor is there anything like it in Turkey. In fact, the inner workings of Turkish companies are closely guarded secrets for a variety of reasons. Turkey has no place for the likes of a ‘Captain Ramptastic’. Why? - well, if you discover something valuable in Turkey it is only natural to keep it quiet and avoid attracting attention.

Mirasol,

There’s nothing fundamentally wrong with the UKOG/AME deal - as long as they know what they’re getting involved with and don’t hype up the potential to PI’s. Putting planning issues aside, Turkey is much better geologically than the whole UK onshore portfolio.

It’s not all good news. Government bureaucracy is excessively complicated, and typically involves a great deal of administrative detail. Byzantium - the Roman name for Istanbul - is the origin of the word ‘byzantine’.

Profits/revenues can be repatriated from Turkey - easily, but only if the foreign investor structures their venture properly. Even then, it takes forever to comply with the foreign exchange and tax laws. UKOG will probably need to incorporate in Turkey too.

Technically, the main project challenge is the Cretaceous Mardin Group reservoir. Sure, there may be a lot of oil in place but getting it out is another matter.

The Mardin reservoir in SE Turkey has strong aquifer pressure support but in nearby fields the average water cut will rise quickly to 90% because the fractures communicate between the aquifer and the oil zone. Getting rid of the water is fairly simple at the surface with a separator at the drilling site and re-injection of water into a disposal well.

Polymer gel injection to control water has met with some success in the oldest Mardin field, Raman, which was discovered in 1948 by Mobil and produced until ~10 years ago. Recovery factor there was about 10%. That means UKOG may have accessed ~ 25 mmbbl unrisked prospective resources and contingent reserves (net to UKOG) for a very modest investment.

But beware of big numbers for oil-in-place, because Genel took a $1bn write off in 2017 when they reduced recoverable reserves in the Taq Taq field in Iraq from 172 mmbbl to 59 mmbbl by failing to take the effects of fractures in the Shiranish (Mardin equivalent) into account.

SS ought to up sticks, close down the UK projects and move to Ankara - although not sure how red trousers would fit in with the Ermenegildo Zegna suits and Brunello Cucinelli shoes preferred by local oilmen.

Also, laws can change quickly in Turkey, and after conversion of Hagia Sofia into a mosque there is even talk about introduction of Sharia Law and interest-free finance, also known as ‘Islamic banking’. Just what UKOG needs!

Blackhopper

You need to take a wider geological view about West Newton before you compare it with the equivalent Zechstein reservoirs further offshore in Deltic’s area.

Onshore, the Cadeby and Kirkham Abbey formations outcrop at the surface a few km further east from the West Newton area. Both rock formations are charged with rainwater run-off from the outcrops over millions of years. Both formations have fresh water abstraction boreholes for municipal water supplies which proves the point. The Cadeby Formation is too tight to produce oil and the Kirkham Abbey Formation, although fractured, will flood with water and prevent hydrocarbon flow the moment any drawdown by pump occurs.

Offshore, the situation is entirely different and the petroleum system is isolated from the Zechstein outcrops so fractures can only flood with more gas. Exactly same as Shell’s Zechstein fields in Netherlands.

This kind of geological common sense goes over the heads of City ‘wheeler dealers’ - but companies with solid technical understanding may seem dull, but won’t lose your money in the long run.

insidious

Foreign companies have made the odd breakthrough;

After years poking around the edges of the Thrace Basin by Turkish companies, the Canadians arrived in the form of Valeura Energy and introduce the Canadian concept of ‘deep basin gas’ and hey-presto - found multi-TCF close to Istanbul. Trouble is that gas price is governed by a WACOG formula calculated by the gov’t.

https://www.valeuraenergy.com

Before that TransAtlantic Petroleum tried fracking/hozontal drilling in the `Thrace Basin and horizontal drilling in the Selmo Oil Field in SE Turkey. That all worked well until PKK moved in and murdered 3 staff.

http://bernews.com/2011/11/guerillas-kill-bermuda-oil-firms-employees/

**** = *****

Mirasol

The early exploration of Turkey started with Shell and Mobil. Shell were quite successful in SE Turkey and Northern Syria exploring what they hoped would be the extension of the Zagros fold belt in Iraq. Mobil built the refinery in Batman because the law at the time required E&P companies to invest in refining and domestic marketing.

Shell and Mobil left Turkey upstreamin the 1990s and Perenco became the main foreign investor with the national company TPAO trying to keep things going. Oyman Sayer, the founder of AME saw an opportunity when working in Kansas in the 1970s and started his own Turkish company. Using money from foreign investor farm-outs he picked over the remains of the Shell/Mobil work with some success, especially with the cost advantage of using his own rigs. We need to watch this carefully, because we'll end up paying western prices for Turkish wells.

Oyman was a charming man who would sit in the lobby of the Sheraton Hotel in Ankara, overwhelm visiting foreign oilmen with his hospitality before presenting them with ‘irresistable’ and ‘compelling’ drilling deals. Rather like a salesman in any Turkish carpet shop. AME is now run by his sons, Cem and Ecvet with western-style governance.

Since their inception AME sided with the ‘*****ist’ side of todays Turkish political arena, which today is generally accepted to be a disadvantage because the more successful Turkish energy companies enjoy support the ruling AKP side. French venture capital outfit, 4D Global Energy, have a stake in AME and seats on the board.

Well, at least SCC don't use AK47s and RPGs to refuse planning applications

https://www.aa.com.tr/en/turkey/wanted-pkk-terrorists-among-neutralized-in-se-turkey/1859040

Jack,

You mention oil price in relation to Deltic.

But Deltic is a gas play and although NBP prices are around 20p/therm today, it’s summer, and winter NBP has been around 70p/therm.

When Beast from East was here, day-ahead prices exceeded 95p/therm. NBP prices are de-linked from oil indices and today are set by gas-on-gas competition at European hubs and LNG. UK’s NBP market is the most liquid of all. i.e. have gas, you can always sell it - unlike oil i.e. have oil, nobody wants it.

You’re right that Deltic investors are partially exposed to capital allocation timing by operators who control infrastructure and need to discover new gas/oil supplies from exploration to keep infrastructure and pipeline running efficiently.

Deltic shareholders include the timing issue in their investment strategies because there is no point drilling wells just for news flow-driven capital growth only to leave money in the ground doing nothing for years. Better to work with infrastructure owners on a just-in-time basis.

Mr Investment

I think you’re onto something in terms of oil value.

Produced water is is the biggest waste stream in the whole global oil industry. It’s is a complex mixture of dissolved and particulate organic and inorganic chemicals in water as chemical-concentrated, saline brine. The most abundant organic chemicals in most produced waters are water-soluble low molecular weight organic acids and monocyclic aromatic hydrocarbons. And likely radio-active contaminants known in the industry as ‘NORM’ which stands for Naturally Occurring Radioactive Material.

It’s a witches brew requiring specialist treatment to bring the water to a standard in UK where it can be legally discharged. It might cost as much to separate and clean the produced water at Fawley as any oil in each barrel is worth. I’d be interested to know the net value of every barrel of fluid delivered to Exxon’s refinery. $0/bbl of fluid?

Now water seems to have flooded the Kimmeridge fracture network at HH, any chance the fractures can be recharged from the micrite matrix with a permeability measured in nano-darcys is negligible.

I’m hoping the forthcoming CPR will provide a realistic scientific plan on how the commercialise the Kimmeridge play, including plans for produced water disposal in the economics.

Ruby

Do they know what they’re doing? Yes - you can be assured of that and shareholders will generally follow what they’re told. But is it true?

But let’s look at the reality through a Deltic shareholder lens..

Reabold’s Cadeby Formation at West Newton typically has a permeability in the range 0.1 md to 0.01 md - this is published in scientific reports. As any professional petroleum engineer will tell you, this is virtually impermeable for oil and might flow gas.

The primary reservoir is the Kirkham Abbey Formation , which is a tight carbonate reservoir overprinted by a high permeability fracture system which has not been reported by Reabold.

The historical development story of several gas discoveries in this area has been very much one of repeated technical and investment failure. Historical production data show that all the Zechstein reservoirs have experienced early water breakthrough, leading to impaired gas rates and low recoveries. The water influx is due to a highly mobile, but finite aquifer, which under field production conditions preferentially flows through the high permeability fracture system, bypassing the gas stored in the tighter matrix.

So what? The forthcoming EWT at West Newton - delayed for some reason - will prove one way or other when Reabold’s offer is worth what they claim.

James Parsnips

Could it be RBD are dragging their feet on the WN extended well test because they know it might not flow?

If the EWT doesn’t meet commercial expectations and the merger goes ahead Deltic shareholders will have sold out for a song.

Better to wait until we know the real value of RBD’s offer.