Developments in the waters off Venezuela and to a lesser extent Suriname are giving CGX even more confidence that their prospects for finding oil or gas offshore Guyana will succeed once the boundary issue is resolved.
CGX, the parent company of ON-Energy recently abandoned its project in Berbice to find onshore oil after three well sites came up dry. This sent the CGX share price tumbling on the Toronto Ventures Exchange and also meant local investors in On-Energy had lost some G$800M. But CGX President Kerry Sully remains upbeat about Guyana's prospects both onshore and offshore.
He told Stabroek Business from his Vancouver offices, that as for the Corentyne, "the new data will be re-interpreted and activity by adjacent operators monitored to determine the merits of further drilling by ON-Energy, or joint venture operations with others."
At the same time CGX has its sights set on the offshore prospects and has been encouraged by recent developments in Venezuela.
In the case of Venezuela, Sully says, "Until a few years ago, there had only been dry exploration wells offshore Venezuela south of Trinidad, in an area called the Deltana Platform. Over the last year, five successful wells were drilled, discovering some giant gas reservoirs, having combined reserves estimated to range from 12 trillion to 20 trillion cubic feet. This is equivalent to 2 billion to 3.3 billion barrels of oil. To put this in perspective, in the last 15 years, there haven't been many billion barrel discoveries anywhere in the world."
This discovery comes at a time when oil prices are at record highs and companies are pouring money into exploration projects to find new reserves to meet long-term demand.
Sully referred to an Oil and Gas journal article of June 27 entitled "Venezuela gas find boosts Chevron LNG plans" which states that ChevronTexaco Global Technology Services has made a significant natural gas discovery off Venezuela that it says advances its plan to evaluate Venezuela's first LNG project.
"The Macuira 1X exploration well lies in 116m of water 121 km off north eastern Venezuela, and 24 km southeast of the Loran gas field. "Macuira 1X confirms that the prolific Columbus gas basin extends farther into Venezuelan waters and provides additional follow-up potential on the block, said Chevron."
With respect to offshore Suriname, Sully reports that in the last year 13,000 km of new 2D seismic has been shot over the offshore by three companies, Repsol, Maersk and Staatsolie. Repsol is proposing a follow-up 3D seismic programme later this year.
And finally offshore Guyana, CGX has gathered over the last five years seismic data shot by other operators since the 1970s, and now has a very large database. "We've been reprocessing that data and also the seismic we shot in 1999 using more sophisticated techniques. We continue to feel the basin has great potential," says Sully.
CGX's drilling rig was moved out of Guyana's waters by Surinamese gunboats in June 2000. And despite a round of talks brokered by Caricom there was no resolution. As such work on CGX's concession has been stalled. Guyana had tried bilaterally to reach agreement on joint exploration and exploitation arrangements pending the settlement of the dispute. But on February 24, 2004 Guyana invoked the provisions of article 287 of the Convention to obtain a legally binding settlement of its maritime border before the International Tribunal on the Law of the Sea.
CGX has since committed to funding part of the very costly legal hearing. Legal fees could run to as much as US$10 million for both countries, exclusive of travel costs for the legal teams and support personnel.
As for the time frame, Sully's assessment is that, "The arbitral proceedings...are proceeding as per the arbitral tribunal's schedule. Guyana submitted its Memorial in February, 2005, and Suriname's Counter-Memorial response is due in November, 2005. The final and binding arbitral award by the arbitral tribunal, resolving the dispute and fixing the maritime boundary between Guyana and Suriname, is anticipated during the first half of 2007.
Sully says CGX's "reprocessing of the Corentyne Licence in the last nine months has been very positive, and we still believe our Eagle target is drill-ready once the border is resolved." But CGX's Georgetown and Pomeroon concessions will need additional seismic to bring any targets up to drill-ready status.
Whether CGX would float another offering for local investors Sully says "At this point we have no plans to fund the offshore exploration in-country. Any investor could participate in this activity by investing directly in CGX through the Toronto Ventures Exchange."
As for existing investors who have been on a roller coaster ride for the past five years, Sully's message is: "We have had incredibly loyal shareholders that understand the risk associated with international exploration in a very under-explored basin. We hope the reward for perseverance will be to someday drill a discovery in Guyana similar to those now being made in the Deltana Platform."