Gold Oil Isn't Giving Up on Peruvian Block

Gold Oil plc on Wednesday issued an update on the company's operations on its onshore Block XXI in Northwest Peru.

The San Alberto-1X wildcat well was drilled in July/August 2006 to a depth of 5,113 feet to explore the Tertiary Verdun sands and the lower fractured Paleozoic quartzites both of which produce gas and oil, respectively, in the surrounding area. The location was decided upon based on an aeromagnetic survey that showed a major Paleozoic structural high up-dip of Olympic's La Casita gas field 20 - 40 Kms to the west and PetroTech's offshore San Pedro oil field 50 Kms to the west. It was assumed that this Paleozoic high would have a conformable Tertiary structure.

Logging, drilling results and regional information showed 315 gross feet of Hydrocarbon-bearing sands in the Verdun and 250 gross feet of hydrocarbon bearing sands in the Paleozoic.

The decision was taken to production test these hydrocarbon-bearing sands in both the Verdun and the Paleozoic, but despite many attempts to curb the influx of water from Paleozoic sands at the base of the well it was not possible to get hydrocarbons to the surface. The well was eventually plugged and abandoned in late November 2006. Following an intensive review of the well results the company has drawn the conclusion that the initial influx of water from below the oil water contact in the lower Paleozoic invaded the hydrocarbon bearing zones and prevented the recovery of hydrocarbons to the surface. This water influx was made worse by the well being shut-in for six weeks while waiting for a larger rig.

With eight of the nine criteria required for producing hydrocarbons being present, the only one missing was getting hydrocarbons to the surface, the company is very excited about the Block.

Since the well was abandoned the company has been evaluating all the data to decide what to do next. We cannot define the Verdun structure without more shallow geophysical data as the aeromagnetic survey is only really valid for the top Paleozoic. After considerable thought the company has decided that the best approach would be to attempt to define the largest subsurface accumulation of hydrocarbons in and around the structural high close by the San Alberto 1 well at the lowest cost possible. Seismic is very expensive and has a long lead time so the current plan is to run a 245 Km grid of an electromagnetic surface survey over the target area.

The survey consists of transmitting a series of pulse-coded electrical transient signals into the ground and measuring the voltage response between pairs of receiver electrodes. The main advantages over seismic are of identifying hydrocarbon accumulations rather than structural boundaries and second is that it is about one sixth the cost of seismic. The technology has been used in Russia and the Caspian area and is similar to that planned to be used after our 2D seismic survey in offshore Block Z34.

The survey will be carried out by Siberian Geophysical Research Developed Company Ltd who have used it successfully in the FSU over the last 10 years. This will be the first time such technology will be used in Latin America and thus may have more risk attached to it than conventional seismic.

Following the survey, which should be completed and evaluated with 3 months, the plan is to drill at least one well and possibly two or more in the block. However, this will depend on the results of the survey which may indicate that a small 2D seismic survey will be needed to totally define a drilling location before drilling.

Gary Moore, Gold Oil's managing director, said:

"The use of new technology well away from where it has been successfully used is at variance to the company's philosophy of being first in but to be second with new technology. However, with all time high manpower and equipment costs in the industry, never mind availability, we need to acquire as much useful information as possible at as low a cost as possible. At the end of the day we still have to drill a well to find oil and gas, but if with this Russian technology we can identify the best location to drill, we could drill a lot of wells for the current cost of a modest 2D seismic survey."

Company: Gold Oil PLC more info
 - Gold Oil In Talks for Partner Offshore Peru (May 08)
 - Gold Oil Granted License Extension in Peru (Jan 30)
 - Gold Oil Extends Survey, Seeks Farm-In Candidates Offshore Peru (Jul 11)
Company: Siberian Geophysical Research Developed Co. Ltd. more info
 - Gold Oil Isn't Giving Up on Peruvian Block (May 09)