CGX won't be drilling for oil until sometime next year dashing hopes among Guyanese for an early commercial find in the supposedly lucrative Corentyne Basin.
The Canadian oil explorer which has been active here for over a decade, continues to process data acquired through a 3-D seismic programme and the majority of the processing is expected to be completed in July. Although they have not completed the processing and interpretation of the data, they are moving ahead, President and Chief Executive Officer (CEO) of the company, Kerry Sully told a news conference at the Pegasus Hotel yesterday.
Kerry Sully "We are already underway in our plans to drill. We are confident that we are going to take a drilling commitment to the government. We just don't know exactly where but that doesn't preclude us from working our way through things such as environmental approval to drill and trying to design a drill programme such that when our final decision is made that we can proceed on an opportune basis,Sully said.
He disclosed that the company expects a number of wells to be in place next year in offshore Guyana and Suriname but there are no specific dates. With other companies coming into the region, CGX is hoping to capitalize on sharing equipment. He said that once the equipment is available, drilling can probably be done in the following year or year and a half period.
But should there be any oil discovery; the period from discovery to first production can be from five to ten years.If we were to drill our Eagle Deep pilot, our prognosis for that is it would take 75 days to drill and test that well, Sully said. He said that they would then test it for a brief period to get some quantitative numbers to assist in reservoir evaluation. He stated that if a discovery is made, then three or four appraisal wells would probably be drilled to confirm the accuracy of the seismic findings.
Following the appraisal work, they would then proceed to field development which would, on a world-wide average take a long time. “It takes eight to ten years between discovery and first production, Sully said adding that there are operators who have done very good jobs recently and the time taken can be compressed if the operator has a jurisdiction that is prepared to work with the company and a motivated team. In this light, he asserted that the period to production here could be anywhere from five to ten years, depending on circumstances.
Sully told reporters that since being evicted from their Corentyne location to the time when the border dispute was resolved, CGX was involved in more technical work that would not normally be done on a basin and identified another target below 16,000 feet which is far more impressive that the original target. He said that the new target, which is below the original one, is the kind of target that is going to attract world attention and it was in the company's and Guyana's best interest to enhance it and that led to the 3-D seismic programme. He said that they are currently going through the final images in trying to put each piece of the puzzle together and it takes time and a huge amount of computer power.
But they are coming and we are going to see drilling done next year. I am really hoping for the sake of the basin that either Guyana or Suriname or both happen to have a discovery and then we see the next steps move forward, he said. Sully stated that in his opinion, if oil is discovered, it would be a five-year timeframe post-discovery for first production. He added that there will be some employment opportunities at the appraisal and development stage.
Questioned on CGX's financial position, the CEO said that the company is well financed and well prepared to move forward. He had earlier stated that to drill a well to a depth of 19,500 feet would cost US$85M and to a 22,000 feet depth, that would cost US$90M.
He stated that the company has US$22M in working capital and their capital programme budget for this year is US$5M while with other expenses just under US$17M will remain. That sum of money is sufficient to allow us to drill with our partners on the Georgetown block where we have a 25% interest, he declared. Sully noted that the targets on the Georgetown block are probably shallower and can be drilled for a lower sum of money. He stated that drill costs are coming down currently and as they proceed through more detailed well design, those costs may further decrease. He stated that another opportunity to reduce costs is if there is activity by others in the basin and noted that there will be, with another company, Murphy, doing some work in Suriname. “So with respect to our share in one of the wells we are well capitalized for that, CGX's CEO declared.
He said that once the 3-D seismic is completed, they could go back to the market and raise additional funds but one of the likely strategies is to find a farm-out partner, who would provide capital, in return for an interest in the well.
In a PowerPoint presentation titled Guyana. On the Brink of Exploration success, Sully recalled the history of the company in Guyana and touted the benefits to Guyana if a discovery is made. He said that the company is purely focused on exploration in Guyana with in-country investment to date standing at US$52M. He pointed out that the Guyana-Suriname basin has been labeled the second most attractive under-explored basin in the world and the area has a proven hydrocarbon system.
With regards to well design, Sully said that they had retained leading consultants in this field. On success scenarios, the Eagle location was given a 19.1% probability of success, the Eagle Deep West location 15.1%, Eagle + Eagle Deep West 4.7 % and no discovery 61.2%. And in acknowledging letters to newspapers regarding Guyana’s share, the CEO said that the gross revenue split would see the country receiving 53% of the cash flow, which he said was very fair to the government and consistent with what is happening in other areas. In a hypothetical situation, with a 50m barrels per year production at US$50 per barrel, Sully said that government revenue would grow 3.5 times the 2007 revenue with an additional multiplier effect times two. He stated that the local impact would be great due to the small population but noted that in speaking with overseas-based Guyanese, many had said that were oil to be discovered here, they would return and this would dilute the impact somewhat.
CGX is managed by a team of oil and gas and finance professionals from Canada, USA and the UK and is financed internationally and has shareholders worldwide. The company has been wrapped up in the quest for oil here for nearly a decade.
In June 2000, its rig was chased out of Guyana's waters by Suriname gunboats as it was about to embark on drilling a well in the most promising area. This led to a diplomatic crisis between Guyana and Suriname and years of futile talks. The deadlock was broken when Guyana took its case to the International Law of the Sea tribunal and secured a ruling largely in its favour in 2007. Since then expectations have been high over CGX resuming its oil search. It however signalled that it had to do further seismic work.
In January this year, the company completed the shooting of the 1,839 sq km 3D seismic survey on its 25% offshore Georgetown Petroleum Prospecting Lic-ence (PPL). Joint Venture Partners in the Georgetown PPL included CGX, Repsol (15%) and its subsidiary, YPF Guyana (30%), and Tullow Guyana BV (30%). The Georgetown survey was shot jointly with CGX's 505 sq km survey on its 100% owned Corentyne PPL that was completed in December last. The data gathered is currently being analyzed.
At yesterday's media briefing former Guyana foreign ministers, Sir Shridath Ramphal and Rashleigh Jackson, who are advisors to the company were present as well as CGX's Investor Relations Officer, Charlotte May, Canada's High Commissioner to Guyana, Charles Court, and other directors and officials of the company.