: OMBU E&P CONTRACT
| Working interest : |
90% (subject to ANH approval of assignment of 10% working interest under farmout agreement) |
| Location : |
Caguan Basin |
| Area : |
300 sq.km |
| Contract period : |
Contract awarded in December 2006, exploration period of up to six years, initial production period of up to 24 years years per field |
| Operator : |
Emerald Energy |
The Ombu block lies in the Caguan Putumayo basin to the southwest of the Llanos Basin. Emerald was awarded the contract with 100% working interest and operatorship.
Prior to drilling the first exploration well, the Company entered into a farmout agreement under which Canacol Energy Inc. earned a 10% working interest, subject to the approval of the ANH, by paying 100% of the cost of the drilling and production testing of the Capella No.1 well.
Capella Discovery
The Capella No.1 exploration well was drilled to a total depth of 3,802 feet, discovered oil of approximately 10° API gravity in two intervals in the target Eocene aged Mirador formation, and was flow tested at a combined oil rate of 240 bopd. The lower interval tested at a stabilised rate of approximately 155 bopd with a water cut of approximately 15% over a 6 day period. The upper interval tested at a stabilised rate of approximately 85 bopd with only traces of water over a 4 day period.
The Capella No.2 well, located approximately 1.3 km southwest of Capella No.1, was drilled to a total depth of 3,550 feet, also encountered oil in two intervals in the Mirador reservoir, and was flow tested at a combined oil rate of 345 bopd. The lower interval was flow tested at stabilised rate of approximately 145 bopd with a water cut of approximately 4%. The upper interval flow tested at a stabilised rate of approximately 200 bopd with a water cut of approximately 10% over a period of 2 days.
Capella No.3, the first deviated well drilled in the block, was drilled from a surface location adjacent to the Capella No.1 and penetrated the reservoir approximately 340 metres away. The lower Mirador reservoir was flow tested at a rate of approximately 135 bopd with a water cut of approximately 8%. The upper Mirador reservoir was encountered with similar thickness and petrophysical properties as in the previous wells but was not flow tested.
The Capella No.4 vertical well was drilled approximately 1.6 kilometres to the southwest of the Capella No.1 location and both of the Mirador reservoir intervals were encountered with the upper interval in this well being thinner than in previous wells. However, poor cementing within the well bore, resulted in neither of the Mirador intervals being effectively flow tested.
The Capella No.5 well, located some 3.4 kilometres to the northeast of Capella No.1, also encountered both Mirador reservoirs. The lower Mirador reservoir was flow tested at an average rate of approximately 82 bopd with a water cut of approximately 52% and the upper Mirador reservoir was flow tested at an average rate of approximately 26 bopd with a water cut of approximately 4%.
The intervals flow tested to date in the first five wells drilled have flowed heavy oil in the range of approximately 9° to 11° API gravity. The Company plans to drill up to a further two wells in 2009 and to complete extended production testing of all the wells as part of the appraisal of the southern part of the Capella structure. Extended production testing of Capella wells commenced in February 2009 with an average daily production rate of approximately 400 bopd, comprising of contributions from the Capella No.1 and Capella No.2 wells, and with the water cut for the field steadily reducing to a level of approximately 6%.
In the Ombu block, the Capella No.6 well, located 4.2 kilometres to the southwest of Capella No.1, was drilled to a total depth of 3,645 feet. The well encountered an exceptionally thick upper Mirador interval with net potential hydrocarbon pay of 80 feet of 37% porosity sand, greatly exceeding the previously recorded maximum net thickness of 23 feet encountered in the Capella No.2 well. The Capella No.6 well also encountered a lower Mirador gross conglomerate interval of 175 feet with hydrocarbon shows being recorded to a depth of 3,605 feet, some 130 feet deeper than recorded in previous wells.
An open-hole flow test was conducted over the full lower Mirador conglomerate interval from which flow is interpreted, using data from previous wells, to be largely from natural fractures in the conglomerate. During this testing over a period of 3 days, the production stabilised at a rate of approximately 295 barrels of fluid per day with a water cut of approximately 90%. Preliminary evaluation of the well data indicates that the water is flowing from high productivity fractures at the base of the section. The Company plans to isolate the lower water-producing section of the conglomerate and conduct another open-hole flow test of the oil bearing interval.
A cased-hole flow test was conducted over the upper Mirador sand interval. During this testing over a period of 5 days, the production stabilised at a rate of approximately 100 barrels of oil per day with a water cut of approximately 2%. Due to signs of early sand production from this unconsolidated interval, the rotational speed of the progressive cavity pump was restricted to approximately one quarter of that used for testing the same interval in the Capella No.2 well. The Company plans to clean the sand from the wellbore and conduct a further flow test.
The Company plans to drill one further well in the southern part of the Capella structure in 2009 and this well, located on the same surface location as Capella No.6, is planned to be the first horizontal well in the field and to target the upper Mirador sand. Following the environmental permitting of the northern part of the block, the Company plans further drilling in this area. If Emerald elects to enter the fourth exploration phase, the minimum work programme will include the drilling of one exploration well by November 2010.
The extended production testing of Capella wells, commenced in February 2009 at an oil rate of 400 barrels per day, subsequently increased to over 700 barrels per day before being temporarily suspended in March due to marketing limitations experienced for the heavy crude oil. The Capella oil has, to date, been sold directly to industrial end users within Colombia but the Company expects that, during commercial development, the Capella oil will be delivered to existing pipelines following blending or upgrading. The Company is currently engaged in removing the existing marketing constraints and anticipates recommencing extended production testing in May 2009.
An independent resource and reserve evaluation of the Capella structure was conducted by Netherland, Sewell & Associates, Inc (“NSAI”), using SPE guidelines, based on information acquired up to and including the Capella No.4 well. In evaluating the oil in place, NSAI considered two cases; the low (P90) case considered the area of approximately 3,500 acres investigated by the first five wells drilled, and the high (P10) case considered the area of the full structure of approximately 22,000 acres. For these cases, NSAI estimated gross stock tank oil initially in place to be 245 and 1,111 million barrels respectively. NSAI estimated the gross recoverable resource, consisting of reserves plus contingent resources, to be 26.5 million barrels in the low (P90) case and 122.5 million barrels in the high (P10) case. NSAI used a lognormal distribution, commonly used in geological estimation, in determining the P50 gross resource estimate to be 57 million barrels.
For determining the proportion of the above mentioned resources to be classified as reserves, NSAI considered only potential drilling locations up to three well spacings away from the existing five wells, equivalent to a developed area of up to approximately 4,000 acres. The resultant gross reserves distribution is estimated to be 7.3 (Proved), 14.8 (Proved plus Probable), and 23.0 (Proved plus Probable plus Possible) million barrels.
By subtraction of the reserves from recoverable resources NSAI estimates the gross contingent resource of the Capella structure to be 19.2 (low estimate), 42.2 (best estimate), and 99.5 (high estimate) million barrels.
.
|
