Member Info for Exploration

draft

the cnooc licence includes blocks 22/21c, 22/22b, 22/26d

~ 25 km west of Cluff's 22/24 block

Last operated by idemitsu

https://itportal.ogauthority.co.uk/web_files/relinqs/nov2015/P1800.pdf

Final paragraph

M6 is therefore being careful not to upset these investors even if his relations with the Gulf monarchies have cooled recently.

ONEE will struggle to become a leading electricity producer again and eventually be confined to electricity transmission and distribution, which is a much less profitable ‘utility’ business - like National Grid in UK. Its virtual monopoly in the production of drinking water (85%) could also vanish. Nareva makes no secret of its wish to invest in water supply even if it is confining itself to the irrigation segment at the moment.

Ducati

Here’s some news from Rabat which will affect progress on the GSA.

According to Morocco’s Petroleum Code, Sound has to sell its gas to ONEE - although the structure of the power sector is morphing rapidly. So one wonders who is the buyer of TE-5 gas, let alone who will be the seller since Sound has said it has no interest or capabilities in gas production. But, here in Rabat, various players are involved. Sure, Sound could sell gas to Enegas but that would need an Inter Government Agreement to comply with EU regulations.

Abderrahim Hafidi, who was appointed to replace Ali Fassi-Fihri as head of national electricity and drinking water utility ONEE last April, will need to finalize the merger between the organization's electricity (ONE) and water (ONEP) branches this year. They have remained separate despite their having been ‘officially’ brought under the same roof in 2011. That was when hydro was generating quite a lot of Morocco’s power. The merger aims to ease the pressure on the state coffers but could generate tensions between the ONEE and the new private sector energy giants like Nareva, which is owned by M6.

Plans involve valuing both branches of the ONEE, which is to say of their electricity distribution and drinking water networks. This financial audit is an a condition for transforming the state-owned company into a limited company able to issue bonds on the financial markets and start the process of restructuring its debt. It is also needed to enable ONEE to provide financial guarantees to power and gas suppliers.

This debt is huge at 60 billion dirhams, even if ONEE has returned to profit since 2016. In common with other developing economies, the government subsidizes the price of power, customers don’t pay, power is stolen and the debt ends up on the nationalized power company’s books (rather than the government, so it all looks good when IMF checks the economy)

Both the royal palace and the government have called on the ONEE to increase investment to improve access to drinking water in the deprived Rif region (500 million dirhams are to be spent with Agence Francaise de Development (AFD) or to adapt its networks in readiness for the arrival on stream of the new renewable energy and gas fired plants being built by private sector electricity producers.

The ONEE's appearance as a single organization puts it in in competition with private sector producers. Nareva, a subsidiary of royal holding company Al Mada,(formerly SNI, which was the royal family’s holding company), should soon become Morocco's leading electricity supplier thanks to its wind farms and coal-fired power station in Safi, which should put it ahead of Emirati group, Taqa, with its coal-fired plant in Jorf Lasfar. Saudi Arabia's ACWA group is another big player building the big Noor solar plant in Ouarzazate for the Moroccan Agency for Solar Energy, (Masen), which is under direct palace control. M6 is therefore being careful not to upset the

Bangers

UK NBP Day Ahead gas price this morning is just under 60p/therm.

There are 10 therms in a 1000 cu ft (mcf)

So 60p/therm implies 600p per mcf.

That’s about $8 per mcf, but it can fall to <$4 in summer or exceed $12 for spot price like it did when ‘Beast from the East’ hit UK last year.

In Morocco gas is mainly used for power generation, so gas price will probably be normalized to Dh/kWh in a GSA with an exchange rate factor in the price formula as well as an indexation to power prices. Foreign companies in Morocco tend to use $US as the functional currency so some kind of conversion to local currency for tax and royalty is needed.

spencerhughes100

It’s horses for courses at the moment. A good GSA for Sound is one where the ‘Reservoir Risks’ are assumed by the buyer. In other words, if the development drilling fails to meet expectations Sound is not liable for shortfall in deliveries. A bad GSA is one where the ‘Reservoir Risks’ result in default in deliveries and penalties. This is especially relevant in the Tagi reservoir which is notoriously unpredictable in Morocco as we have all seen with recent drilling results.

A Depletion Contract is a production sales contract in which the sale volumes are governed by the performance characteristics of the TE-5 gas field. A build-up estimation, an expected Plateau and a how decline volumes will be defined initially. This is a starting point, but can be amended as the production characteristics of the gas field become clear as more wells are drilled and operating experience increases. For relatively small fields like Sound’s TE-5 horst, the buyer assumes a large share of the reservoir risks. The build up, plateau and decline has been defined by Sound/Schlumberger/Onhym (Sellers), Enagas/ONEE (Buyers) and AFG (Financiers) Right now, the discussions probably revolve around how much money/revenue each participant can expect.

At the other extreme, the option is a ‘Supply Contract’ which would be good for Sound if they had two or more gas fields with lots of gas – but they don’t - yet. Under supply contracts, the seller has to deliver a specified volume of gas at a delivery point without any commitment about the source of the gas. The quantity and any requirements about time of delivery are clearly stated. Sound (seller) would free to supply gas from any field available. In such a ‘bonanza’ several buyers could receive gas under different supply contracts from the same (big) field or group of fields. Most importantly for Sound, reservoir risks with the Seller - the quantities of gas available under a supply contract must be constant throughout the length of the contract. Any variations, such as increased call on deliveries are defined in the Contract.

In Morocco, the government may index gas price to power prices because there is little demand for gas for domestic space heating – there are no city gas reticulation systems and bottled LPG is preferred cooking fuel.

Here’s a typical GSA – based on a field in India, but structurally similar to Agreements elsewhere. Note how the price is indexed to local gas market conditions. I post it simply to show the level of detail gas sales agreements require.

http://geoenpro.com/httpdocs/nio/docs/4%20%20GeoEnpro_Model%20Gas%20Sales%20and%20Purchase%20Agreement%20(GSPA).pdf

Morocco is a ‘young’ gas market currently requiring buyer-seller agreements. The Government is aiming for a ‘liquid market’ similar to European gas hubs with defined network codes where anyone with gas can sell to any buyer – but that is years away and needs more domestic exploration success to become a ‘

Thanks Lindum

We should be encouraged by John Argent’s note to the extent that BM’s team is trying to develop a predictive depositional model for the presence of good Tagi sandstone reservoirs. It’s a tough geological problem to solve.

Taking a wider view, in Algeria, Tunisia and western Libya the upper part of the Triassic ‘Tagi’ is dominated by ‘flood plain’ silty, fine grained rocks similar to those reported at TE-8, TE-9 and perhaps TE-10.

The classic Tagi reservoirs in Algeria and southern Tunisia are older – Landinian and Anisian age – which underlie the Carnian – and were deposited in braided rivers with coarser grain size sands. As John Argent pointed out, it is difficult to date these rocks using palynology, although carbon isotope analysis can be used since it provides a record of atmospheric carbon which can be correlated on a regional basis.

So, referring to the ‘geo-seismic section’ shown on the latest presentation, it follows that the better Tagi reservoir is actually downdip from the location of TE-10. Moving updip from TE-10 will likely encounter even siltier/shalier flood plain Tagi rocks of Rhaetian and Norian age.

ddboy

On the John Argent note, reported yesterday;

“The diagram on slide 6 of the Q1 2019 Investor Presentation illustrates an interpretation of the TE-10 well result that we have to date. At present we have determined from the wellsite palynology that we have a TAGI sequence of Rhartian to Late Carnian (Triassic) in age. In the lower section of the well the wellsite palynological ages are indeterminate, however, we are currently interpreting this lower section as potentially Permian in age. The Permian is a period within the Palaeozoic era. Further analysis of the cuttings data will be required to confirm this interpretation of preserved Permian in TE-9, this work is on-going. Incidentally, the TE-8 well also has a Permian section (dated through post-well palynological analyses) preserved beneath the TAGI sequence.”

Here are a few comments;

It seems the dating of the ‘Tagi’ shows TE-10 penetrated the upper part of the Tagi sequence based on wellsite palynology. Palynology is the study of pollen spores, since there were no microfossils around at this time and the Pangea super-continent was dominated by plant life.

The Carnian period had ‘wet weather’ during the Triassic and well-known for the ‘Carnian Pluvial Event’ when it rained cats and dogs for a few million years and created huge braided rivers which deposited the shales and sands in floods penetrated by TE-10, which contain gas.

In many ways the Tagi lithostratigraphy at TE10 is analogous to the Mercia Mudstone in UK which forms the cap-rock (seal) in the Wytch Farm Oilfield. It is mainly a red mudstones and subordinate siltstones. Thin ‘ratty’ sandstones are also present.

So, in summary, a geological picture is emerging with the ‘holy grail’ good Tagi reservoir stratigraphically below (older) that found in TE-10. Sound is pushing the envelope here with detailed palynology which has been lacking in many previous studies in Morocco. Sound has chosen to explore a very complex petroleum system and TE-10 looks to be an invaluable data point.

wh0sthedaddy

See slides 14 and 19 for Fastnet’s 62 tcf ‘unconventional’ gas play in Carboniferous in Tendrara. They had a different basin model to Sound. It involved Silurian hot shale as a deeper source and coals within Carboniferous itself.

https://www.proactiveinvestors.co.uk/upload/MediaFile/File/3/fastnet_corporate_presentation_september.pdf

Thanks ddboy & Jordan

There seems to be a much better, objective RNS announcements, perhaps related to recent change of nomad to Cenkos? Anyway, I’m assuming 7” liner has been installed and cemented and completion fluid is in place prior to suspension of TE-10 to make it safe.

Regarding the TE-10 reservoir, from reports, it appears to be a series of thin, alluvial sandstones, perhaps separated by shale ‘baffles’ which may restrict vertical connectivity and gas flow. There is no reference to grain size, which dealt the killer blows to TE-8 and TE-9.

Recovery of fluids and reservoir pressure and temperature is good news because the reservoir engineers can begin to refine the behaviour and flow characteristics of the fluids at reservoir conditions and calibrate the gas pressure gradients. I expect the results from the MDT tool have also provided pressures in each sand unit. If all the pressures lie on a gas gradient of ~0.1 psi/ft, then great news – it means the sands are all connected behind pipe with the well bore having access to large gas volumes which should flow at a constant rate with little drop in reservoir pressure. On other hand, if the MDT pressures are same in each sand unit and do not lie on a gas gradient it suggests each sandstone layer is isolated and will deplete rapidly. In the latter case, inducing fractures ‘mechanically’ might help.

We have not been told how stimulation will be conducted yet and we can be sure completion engineers will be working hard to deliver a good result. One option is to use powerful perforating guns such as Schlumberberger’s ‘Frac Gun’ system which can be run on wireline, since the rig has moved off location.

https://www.slb.com/~/media/Files/perforating/product_sheets/gun_systems/carrier/312fracgun.pdf

The next challenge beyond flow testing, is to drill more wells around TE-10 to appraise the extent of the thin Tagi sandstones. If the production test is encouraging it might justify acquisition of a modest 3D seismic survey which really was the key to commercialising the TE-5 horst.

But until the flow test is conducted TE-10 is either ‘huge’ - to quote JP - or ‘not very huge at all’.

All commitments for Tendrara have now been met, so I expect the group will be trying to agree how to get the best ‘bang for buck’ out of TE-11.

https://telquel.ma/2019/01/10/aziz-rabbah-fait-marche-arriere-sur-le-plan-gazier-2021_1625100

In a meeting with the media on January 9, Energy Minister Aziz Rabbah said that the Moroccan gas plan will not be ready for 2021. A new roadmap will be proposed in 2019, taking into account the extension of the contract. of the Maghreb-Europe gas pipeline.

The Moroccan Gas Plan will not be ready for 2021. At a meeting held in Rabat on January 9, the Minister of Energy Aziz Rabbah said that the roadmap of the ambitious plan will be reviewed and readjusted, and this by integrating several new elements. First, the minister is counting on the extension of the exploitation of the Maghreb-Europe gas pipeline. This contract for the supply of Algerian gas ends in 2021. For the two power stations of Ain Beni Mathar and Tahaddart, the minister estimates that the gas field of Tendrara, which will come into operation in 2021, will be able to satisfy up to 40% of their needs.

The Gas to Power will also be revised in the new roadmap that should be presented by the Minister during 2019. This mega-project of 45 billion dirhams was presented four years ago by the Minister of Energy and Mines of the United States. Abdelkader Aâmara, and aimed to increase the share of natural gas in the Moroccan energy mix to reduce the share of coal while reducing the energy dependence of Morocco vis-à-vis Algeria. For Aziz Rabbah, the share of gas in the energy supply of the kingdom will also be reviewed, given the increasing importance of renewable energy in the Moroccan energy mix. The minister recalled that renewable energies accounted for 35% of the electricity mix at the end of 2018, with a target of 42% in 2020 and 52% in 2030.

The minister also announces the strengthening of the electricity interconnection with Europe. Thus, the study of a third interconnection with Spain will be launched this year, which will be added to the one already in progress with Portugal. Announced last November, a 1,000-megawatt power cable will connect Morocco and Portugal before 2030, at an estimated cost of between 600 and 700 million euros.

Another major project that awaits the Minister in 2019 is the transfer of ONEE's renewable energy activities to Masen. According to Law 38-16 on the National Electricity Board, published in the Official Bulletin in 2016, all renewable energy goods and projects will no longer be the responsibility of the Office but the Masen. The transfer has not yet been made.

A reform of the mining code will also be proposed so that local authorities can collect a portion of mining royalties. Aziz Rabbah recalled that 2,000 illegal coal sinks have been closed in Jerada in 2018, and another 1,500 will be closed this year. These closures are the result of a series of deaths in the collapse of clandestine mines in the city, which has resulted in a protest movement of residents of the former mining town in early 2018.

- a good guess Scoobydo5

Perenco need to keep their part of the Bacton Terminal chugging away at 12 mmcmd using the existing infrastructure to make it pay.

So selling their own gas into the NTS might make commercial sense.

They also operate the gas storage project at Humbly Grove near Alton in Hampshire and are long-term participants in UK's gas supply industry.

http://mip-prod-web.azurewebsites.net/InstantaneousView/Index

nmed111

Dunno

If the pressures in the individual thin sandstones follow a gas gradient with depth, then they could be connected to a bigger rock volume. On other hand, if pressures show no gradient we are dealing with isolated sand bodies perhaps with limited extent. This is what the MDT logs will help to clarify.

Then there is a decision about whether to run casing and cement before perforating. But it may be that an open-hole test using inflatable packers run on drill-pipe is a better option. But until another announcement we just don't know.

And neither does James Parsons.

- award to BM + team if TE-11 is dry well too.

Oh yes - same award to Chairman, CEO and CFO.

Denzie

The schedule for Pegasus West isn't driven by the 'need for speed', but rather to dovetail the gas, condensate and water wellstreams into the existing capacity of the Cygnus platform and export pipeline to Bacton. In other words, there is no point developing the single well Pegasus West if there is no export capacity. You can see the various production forecasts in section 2 of this link. https://www.spirit-energy.com//images/site/SPT-PRJ-SNS0032-ENS-0001-Pegasus-West-Development-ES-compressed.pdf

We tend to forget that the pipelines and terminals are what makes these smaller fields attractive, and the commercial imperative is to keep them working at full capacity.

Then, if you look at CNRL's Economic Feasibility Study on their website you can also see how an exploration well in 2019 is followed by one or more additional wells with development/production soon after, either via Cygnus or Breagh export systems to shore. There is plenty of ullage in both pipeline systems by the time CNRL might need it.

The short-term value addition to CNRL, which is why most of us are invested, comes from conversion of Prospective Resources (worth < $1/boe) to Proven Undeveloped Reserves (worth ~ $25/boe) - which obviously requires exploration/appraisal success during 2019. So it's a case of hanging in there.

Joe Creed

Here are previous Tendrara Tagi average porosities and net pay (defined as Tagi porosity ~6%. TE-3 cut-off used 4%. All wells with pay proved gas as shows. Only TE-5 proved sufficient reservoir quality to flow to surface without stimulation in vertical well. Let's hope there is deeper, clean Tagi reservoir at TE-10.

WellsNet Pay (m) Av Porosity
>6% %

TE-1 36 7
TE-2 38 9.5
TE-3 6 4
TE-4 3 6
TE-5 30 5.5
SBK 16 4-6
TE-8 ?0 ?
TE-9 ?0 ?
TE-10 ?10 ?8

- and Christmas isn't a public/national holiday here in Morocco. It's just another day at the office.

Dickupham

Understood.

Yes - it is a feeding trough for the PE lot IMO.

PE investors tend to 'talk up' oil prices or talk them down to generate transactions. Only a few years ago GS were saying oil at $200/bbl. Perhaps Jezza will re-invent British Gas of the 1980s. Laidlaw is just one of a long line in the British Gas dynasty - remember Cedric Brown whose name is is still synonymous with fat cattery. Centrica's current boss, Iain Conn, has rid the company of the risky upstream ventures to concentrate on serving customers. Boring, but necessary for a utility business.

On a positive note, UK now has the most liquid market for UK gas producers outside USA thanks to the NBP hub pricing mechanism, so something good came out of it all after 30 years!

dickupham

The China connection is a legacy from the Neptune/Engie deal. Engie has been in China for many years doing gas/electricity/infrastructure. A few years back there was a French/Chinese summit in Paris and something had to be signed - enter Engie - the main French energy company working in China.

That's where cooperation between Engie Upstream and Chinese Investment Corp started has been going on for >7 years. CIC took a 30% interest in Engie's E&P subsidiary. When Neptune bought Engie's upstream interests it came complete with the Chinese interests and hence the creation of the UK subsidiary.

It's a financial interest and, stacked up against the likes of the Carlyle Group, it's simply a 'dormant' shareholder looking for long term returns rather than control.

Thanks LimitedAccess. I hope these posts provided some context - especially the wheeling & dealing going on around us. I could be totally wrong about Neptune or Spirit.

According to ENSCO, their rig 101 is now reported on contract to Neptune for two firm wells, the first of which is the Cygnus fault block and second location is not announced. This is followed by unlimited one-well options. To activate each one-well option the Operator, Neptune, normally has to provide a specified number of days advance notice to the Drilling Contractor, prepare a site survey, assess sea-bed load capacity, complete an EIA etc before OGA authorises the drilling.

Ensco 101 is a jack-up rig capable of operating in 400ft of water. Watch this space.

dickupham

I tend to agree with you on the low valuation. i thought the Economic Feasibility study by Xodus was the perfect example of how to things properly on AIM rather than the 'plate spinning' which goes on elsewhere!. Taking into account what is emerging in the 2248 area a single successful well on CNRL's acreage will trigger a substantial upgrade in value.

There is a steady ‘churning’ of interests to the east of our prospective trend. Until a couple of years ago - in the pre-Spirit days - the dominant player was Centrica with their 10% partner, Atlantic Petroleum. But Atlantic ran out of road and sold its interest in the Pegasus block for $7.5 million to Third Energy. Third Energy then divested the same area to Hague and London Oil and Gas earlier this year. Hague and London is supported by Engie - who also had an interest in Cygnus. Neptune bought Engie E&P International in a series of transactions in 2017/2018. Neptune is backed by three PE groups and is highly ‘aquisitive’ in its growth strategy, but, so far, only for proven/producing assets - rather like Ineos.

The ‘name of the game’ now is to maintain gas exports via Cygnus to the gas terminal at Bacton. Bacton used to receive gas from the Esmond and Forbes gas fields and their platforms were decommissioned in 1995. After that the export pipeline system (Esmond Transmission System, ‘ETS’) was renamed EAGLES (East Anglia Gas and Liquid Evacuation System).

I don’t think it is necessary for CNRL to update their website right now, and they will no doubt be acutely aware of competitors’ activities and not inclined to comment or speculate. Right now CNRL is perfectly placed. Just need the money for a well!