San Leon Energy has signed an agreement with ONHYM to employ proprietary In-Situ Vapour Extraction ("IVE") technology over the 6,000 km2 (1,482,626 acres) Tarfaya Oil Shale project. The agreement was signed with Mrs. Amina Benkhadra, General Director of ONHYM and Moroccan Minister of Energy, Mines, Water, and Environment.
San Leon has been working with ONHYM for two years to explore the potential of the available and massive in-place oil shale opportunities. The company has therefore signed a three year Memorandum of Understanding with the Moroccan authorities which grants San Leon exclusivity to convert the area into a License. San Leon estimates reserves of billions of barrels of recoverable oil from the Tarfaya oil shale over the 6,000 km2 area.
To exploit this potentially vast resource, San Leon has acquired an in-situ oil extraction technology through an agreement with the U.S. company Mountain West Energy (MWE). This technology is exclusive to San Leon in Europe, North Africa and the Middle East. The successful testing of this technology enabled San Leon to successfully apply for the rights to test the large oil shale concession in Morocco.
Laboratory and site testing in the U.S. has been completed and Moroccan site testing will begin later this year. The feasibility study, which includes a work program, has been presented and agreed in Morocco by ONHYM.
The Tarfaya oil shale has successfully produced 62 liters per tonne in Mountain West Energy's Utah lab. This is similar to the yield reported by Shell when they were testing in the Tarfaya area from 1981 until 1986. Shell drilled 55 shallow boreholes, all of which were petrophysically logged, in 1982, encountering the Cretaceous and organic rich Tarfaya oil shale within the San Leon area. Shell established an open pit mine and heated the oil shale in a retort for oil production. They left the area in 1986 after oil prices had plunged to $10 per barrel.
IVE is an in-situ oil shale extraction technology that forces heated gas through a central injector well and into a high oil yielding and fractured oil shale. The oil is then produced from several extraction wells, equidistant from the central injection well. IVE was tested successfully in the Naval Petroleum Reserve #3 at the Tea Pot Dome Field in Wyoming, with assistance from the US government, in order to increase production from the existing heavy oil reserves.
The in-situ process of oil extraction is cleaner environmentally than the alternative technology, open pit mining, which is invasive. San Leon's IVE process "cooks" the oil shale in the ground (or in-situ) and the gases utilized in the process are recycled within a closed system.
San Leon conducted a detailed test study from August 2008 until January 2009 and produced an extensive report outlining the IVE technology and the prospectivity of the Tarfaya oil shale. On the basis of the Tarfaya Work Study, ONHYM and The Group signed the Tarfaya Oil Shale MOU, which gives San Leon 3 years to test the IVE process.
The first test project is now in the planning stage and The Group expects this to be completed in the first half of 2010. The test site will be selected in a location approximately 200m above the high oil yielding zone within the Tarfaya oil shale. It could take at least a year to mobilize all the essential equipment for San Leon's first test site.
In a similar transaction, Petrobras has recently signed an MOU with ONHYM for the Tarfaya oil shale, neighboring the San Leon acreage. Petrobras also has the Timhadit oil shale MOU, which lies in the northern part of Morocco.
Phil Thompson, CEO of San Leon commented, "This is a monumental achievement for our company to add the potential to access huge recoverable oil reserves from the Tarfaya shale through our oil shale technology. We are delighted with this accomplishment as it represents a major step in the development of San Leon. We are particularly pleased to note the strong support given by ONHYM in our negotiations and trials process and look forward to working together to develop the burgeoning Moroccan oil and gas environment."
Mrs. Amina Benkhadra, General Director of ONHYM and Moroccan Minister of Energy, Mines, Water, and Environment commented, "We are delighted that San Leon has decided to join with international super majors in exploring the potential of our oil shale. Morocco remains committed to developing its oil and gas industry to the highest of international standards and will continue to provide positive support to foreign direct investment, be it through the provision of technical data, or working in co-operation to upgrade the logistical systems in country to allow efficient development."
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