RE: In my view the deal is superb2 Dec 2024 10:16
I think the key risk is seal integrity - the seismic shows gas leakage above the structure and seafloor samples show thermogenic methane has reached the surface. The way the Chance of Success risking is calculated, the seal is likely to have a very high risk factor, bringing the CoS down significantly. The calculation will be heavily skewed by an 1 negative element (see Point 4 below).
A few comments from my experience as a geologist in the industry for 20 years:
1) Seals are not "broken", they act as hydraulic pumps, opening to relieve pressure before shutting again. The leakage is likely roughly equal to the charge rate. Many discoveries in the area have these features and huge volumes retained in the reservoir.
2) The coal source rocks look very thick in the seismic. This is likely to produce significant charge volumes.
3) 20-25% CoS is pretty industry standard in frontier areas.
4) CoS = P(Source) x P(Seal) x P(Reservoir) x P(Trap) x P(Migration). Values for each element are never 1.0 as we can never be certain, so 0.9 is often used. So assuming all other elements are 0.9 (90%) and the seal is 0.3 (30%), we would have 0.9*0.3*0.9*0.9*0.9 = 20%.
5) The gas seeps and seismic evidence show this is an active system.
I have seen many worse plays with a higher CoS, so I suspect ERCE who conducted the CPR have deliberately been cautious. In fact, I know they have having spoken to them at a conference recently.
Is it guaranteed? Of course not, it's a calculated risk, but I feel the huge volumes are well worth it.
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