"Local knowledge can be incredibly valuable," says John Cullen, Founder and director of CGX. "It’s pointed to at least six different oil and gas shows on our onshore concession."

CGX has discovered there’s a lot of local knowledge about oil and gas seepage on its onshore Berbice Block in Guyana. "After our meeting with Staatsolie in February 2003 and learning about its onshore program, we knew it was time to take a closer look at our onshore block," says Kerry Sully, President & CEO of CGX. "We think there are many analogies between what’s happening onshore in Guyana and Suriname. Alot of local evidence has surfaced to support this thesis."

In Suriname, Staatsolie, the state oil company, is producing 12,000 barrels of oil per day from its Tambaredjo oilfield. Proven reserves are estimated to be 170 million barrels. Since that discovery, Staatsolie has been exploring its 200 kilometre coastline between Tambaredjo and New Nikerie, near the Guyana border. Using geochemical sampling and aeromag, Staatsolie has identified a number of anomalous prospects.

Kamal Dookie, a Founder and director of CGX Resources, grew up in Guyana. His family originally lived in the Berbice area. Kamal introduced John and Kerry to Mr. J. P. Singh, an incredibly agile and alert man of 90 who runs a cement-block business and is a family friend of the Dookie family.

Mr. Singh told the group about a drainage canal dug in the '30s. "It looked like 'diesel' coming out of the ground this high," said Mr. Singh, raising his arm to knee level. "We had to lay concrete in the bottom of the canal to hold the oil back," he explained.

Back in Canada, CGX began to do some research. In July, Warren Workman, VP Exploration of CGX and Director and President of ON Energy, spent several days in the Berbice area. This time, Mr. Singh showed Warren and Kamal the canal. "Mr. Singh recalled that the oil show occurred in 1932 when the channel was built and he was 19 and working on the project. Remarkable man," says Warren. At low tide, Kamal returned to the area and saw gas bubbles on both sides of the canal, collaborating the local reports of hydrocarbon seepage in the Skeldon drainage ditch.

"Also at Skeldon, Mr. Singh led us to the location of a stratigraphic test well drilled by Shell in 1967 and the local water well," says Kamal. "While Shell's well was dry, the local water well—drilled only 100 feet (30 metres) away—had oil and gas shows at 1,450 feet (480 metres)!" Warren also met with Mr. Ronald Sangster, agricultural manager for Rose Hall Estate whom Warren describes as, "a very capable take-charge guy who offered us every courtesy." Mr. Sangster showed Warren the drilling pad at Rose Hall where heavy oil shows were found in the well around 6,000 feet (2000 metres) in 1942.

After all of this first-hand evidence from local people, Warren headed to the C. N. Barron Library, named after the pre-eminent geologist of the 20th century in Guyana. There's limited information about the Rose Hall well in this library, but Warren has since acquired a geological report with attachments from the British Geological Survey. "However, I discovered C. N. Barron reported an oil-stained sample seep when digging the flag pole foundation in 1966 in the village of Liverpool, 18 miles (11 km) south of New Amsterdam," said Warren. He recovered another sample approximately 70 feet southwest at the base of the clay. The location is on the north flank of a gravity anomaly.

"I also reviewed the 1967 map by C.W. Walron of the composite surface geology of Guyana. A basement outcrop was mapped as a Phanerozoic Greenstone (meta-sediment) east of the Berbice River at the Mera settlement," says Warren. "The fact that the Canje River flows parallel to the coast instead of flowing toward it also supports the theory there’s a significant basement high in the area. If it restricts water flow to the coast, it would also form a barrier to hydrocarbon flow further inland, and may also provide the framework for trapping in the sedimentary deposits."

Further news about oil seeps at Mera caught the attention of Warren and Kerry based on a copy of a hand-written letter from Mr. Magabar Sawh to The Honourable Prime Minister Samuel Hinds, dated June 20, 2000. Mr. Sawh took inventory at Mera Sugar Estate during the war.

The letter explains that the estate was "about 27-30 miles by road from New Amsterdam" and was owned by Mr. Manuel Veira. Mr. Sawh noted "oil and pitch floating on the riverbank" side of the Mara Estate loading dock. "I saw it and Mr. Manuel Veira said to me he should put aside money to drill for oil as soon as the war is over. I am sure oil is there."

This wasn't the first time Mr. Sawh had noticed oil and gas seeps. His letter indicates another show of gas and water farther east during "the biggest dry weather seen in the 1930s." "The seep locations described in Mr. Sawh's letter are exactly where I'd hope to find them," says Warren.

"It confirms there’s migration of hydrocarbon from the Canje Formation source kitchen offshore. It's being deflected to surface by the basement highs. Our challenge now is to find hydrocarbon traps between the basement high and the coastline. Our geo-microbial survey should enable us to quickly zero in on the most prospective areas."

This local knowledge led CGX to explore onshore and form a wholly owned subsidiary, On Energy Inc. ON is owned 38% by Guyanese investors, locals who will have the opportunity to directly share in any discoveries onshore Guyana.

In the fall of 2003, ON Energy commenced exploration activities which included geochemical analysis, 2-D seismic and culminated in the drilling of three onshore wells which were abandoned. The Hermitage well had good gas shows however the well was abandoned due to poor reservoir quality and modest reservoir thickness. ON Energy is currently evaluating farm-in requests by other operators to drill on its onshore acreage.