Further to the news releases of BrazAlta on June 9, 2008, and June 18, 2008 and November 3, 2008, BrazAlta has provided an update on the Canacol Energy Inc. farm-in to the onshore Guyana PPL operated by Groundstar Resources Ltd.
Canacol on May 18, 2008 negotiated a farm-in to a 7,800 sq km exploration contract located in the Takutu Basin, located onshore Guyana adjacent to the border with Brazil. The contract was awarded to Groundstar Resources in July, 2005 for a four year period.
The block contains the Karanambo discovery made by Home Oil in 1982. The Karanambo 1 well tested 411 barrels of oil per day (42-degree API) from a sub-salt reservoir during a five-hour drill stem test proving the existence of a light oil hydrocarbon system within this frontier basin. The discovery contains an estimated 100 MMBO gross (55 MMBO net) mean contingent resources. Two other large seismically defined prospects have been identified on the block. Pursuant to the farm in Canacol must pay 100% of the exploration costs up to a cap of US $12 MM to earn a 55% interest in the block.
Petroleum-Initially-in-Place (PIIP) is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. The Karanambo discovery volumes are listed as contingent resources, which are defined as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to the lack of a modern well capable of production and are therefore contingent on the re-entry or replacement of the current well.
It is also appropriate to classify contingent resources as the estimated discovered recoverable quantities associated with a project in the early evaluation stage. There is no certainty that it will be commercially viable to produce any portion of the resources. Swansons mean values represent a weighted average of 30% P90, 40% P50 and 30% P10. GCOS refers to the Geological Chance of Success, which in the case of Karanambo is 100%, as hydrocarbons were tested from the discovery when drilled in 1982.
The Rewa High and Pirara River prospect resource estimates are for prospective resources, which are defined as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. The GCOS for both prospects is 10%, meaning that there is a 10% likelihood of an accumulation being found at each prospect.
The operator plans to drill both an appraisal of the Karanambo discovery and the Rewa prospect commencing in March 2009 and ending in August 2009 for a total cost of $12.6 MM, which includes the drilling and testing of each well. BrazAlta will be going out to market to fund a portion of the drilling program.
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