September 10, 2008

CGX confirms 3D seismic programme for Georgetown Block

Kaieteur News

CGX Energy Inc. yesterday announced that YPF Guyana Ltd., a subsidiary of RepsolYPF acting as operator of the venture, has awarded a 1,650 square-kilometre 3D marine-seismic contract to Fugro-GeoTeam on the Georgetown Petroleum Prospecting Licence (PPL) offshore Guyana.

CGX Resources Inc., a wholly owned subsidiary of CGX holds a 25% interest in the Georgetown PPL. Fugro's seismic vessel 'RN Geo Pacific' will begin activities later in the month.

According to Kerry Sully, President and CEO of CGX, the seismic activity will be jointly conducted with CGX's previously announced 536 square kilometre 3D programme on the adjoining Corentyne PPL, in which CGX holds a 100 per cent interest.

In addition, Sully in a statement to the media yesterday noted that, "The combined programme will result in a 33 per cent saving per square kilometre to CGX through economies of shared mobilization and longer sailing lines on the previously announced Corentyne programme.  CGX's share of the combined programme is estimated to be $15.8 million which will be funded by CGX from existing working capital."

CGX also confirms that the farm-out process that has been led by CGX's agent Jeffries, Randall and Dewey of Houston, Texas has been put on hold during the 3D seismic period.  On this, Sully said, "We were pleased that significant interest was generated in this joint venture process on CGX's Corentyne PPL. However, given that the 3D seismic acquisition is about to proceed on the Corentyne and Georgetown PPLs, CGX has put the farm-out process on hold until the 3D seismic data has been received and preliminary interpretation completed."

CGX holds an interest in four Production Sharing Licences from the Government of Guyana, covering 8.7 million acres offshore and 800,000 acres onshore.

The U.S. Geological Survey has upgraded the Basin to No.1 from No.2 for undiscovered resource potential. Greenland was downgraded because of the marginal economics of producing under ice.

The U.S. Geological Survey estimates that the basin holds some 15 billion barrels of oil.

A report completed by Gustavson Associates LLC of Boulder, Colorado, U.S.A. for CGX Energy Inc. had revealed that a best estimate of prospective resources in four prospects on the Company's Corentyne PPL located offshore Guyana may yield some 2.7B barrels of oil.

Prospective Resources are regarded as the quantities of oil and gas estimated to be potentially recoverable from undiscovered accumulations, if discovered; they would be technically and economically viable to recover.

The results of the assessments were illustrated in three categories namely, low, high and best.

The low estimate category is considered to be a conservative estimate of the quantity that will actually be recovered from the accumulation.

The term reflects a confidence level where there is a 90 per cent chance that a successful discovery will be more than the resource estimate.

Best estimate, however, is considered to be the best estimate of the quantity that will actually be recovered from the accumulation.

The term is a measure of central tendency of the uncertainty distribution and in this case reflects a 50 per cent confidence level where the successful discovery will have a 50 per cent chance of being more than the resource estimate.

The high estimate category is considered to be an optimistic estimate of the quantity that will actually be recovered from the accumulation, reflecting a confidence level where there is a 10 per cent chance that the successful discovery will be more than the resource estimate.

The report did, however, note that the distributions did not include consideration of the probability of success of discovering and producing commercial quantities of oil, but rather represent the likely distribution of the oil deposits, if discovered.

Gustavson was retained by CGX to prepare the Report to estimate the potential undiscovered oil and gas resources underlying the 9,170 square kilometre offshore portion of the Corentyne PPL in which CGX has a 100 per cent working interest.

According to the company, the assessment did not review CGXâ€Ts 25 per cent interest in the 9,742 square kilometre Georgetown PPL, its 100 percent interest in the 3,968 square kilometre Corentyne Annex nor its 100 per cent interest in the 11,400 square kilometre Pomeroon PPL.

Gustavson is a global consulting firm consisting of geologists, geophysicists, engineers, land and contracts managers as well as economists and financial experts who solve problems on all aspects of natural resource evaluations.

The accuracy of any estimate is a function of available time, data and of geological, engineering and commercial interpretation and judgment.  The most significant lead, according to CGX, has been a series of structural traps in the Upper Cretaceous that it called the Eagle Deep targets within the Corentyne PPL. The company says it's looking forward to further refinement of the interpretation with 3D seismic, and testing of concepts by drilling as soon as possible thereafter.

On September last, the United Nations Arbitral Tribunal unanimously awarded Guyana close to a 13,000 square-mile swath of the Atlantic Ocean, paving the way for Canadian firm CGX to continue oil exploration after it was evicted in 2000 by a Surinamese gunboat.

The Arbitral Tribunal found that Suriname acted unlawfully when it expelled the CGX drilling rig, which was licensed by Guyana in 2000.

The tribunal was particularly critical of Suriname for resorting to the use of force in the eviction of the CGX oil rig.

The ruling saw CGX retaining 93 per cent of its Corentyne Licence and all of its Georgetown Licence.