Argentina’s YPF Sees Cost Of Vaca Muerta Drilling Falling 10%

EZEIZA, Argentina, April 16 (Reuters) – The cost of drilling in Argentina’s vast but barely tapped Vaca Muerta shale formation will fall at least 10 percent by the end of 2016, state energy company YPF said on Thursday, part of an efficiency effort aimed at attracting much-needed investment.

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The cost drop is expected to start in August when Argentina starts using its own sand in fracking, the process by which shale oil is extracted, rather than more expensive imported sand, YPF’s Chief Executive Officer Miguel Galuccio said.

This may help Latin America’s No. 3 economy attract the investment it needs to erase an energy deficit that costs billions of dollars per year in already low cash reserves.

YPF has already cut the cost of drilling a vertical well in Vaca Muerta to $6.9 million from a previous $11 million, Galuccio told reporters gathered on the outskirts of Buenos Aires for a demonstration of how YPF is refining fracking sand.

By the end of 2016, Galuccio said Argentina will produce all sand it needs for shale drilling.

“We are continually looking for ways to reduce well drilling costs. The sand is one form, which in itself will allow us to save 10 percent,” Galuccio told Reuters.

“And there are other things we are doing which lead us to think we are going to save not only 10 percent. Our target will be much more than 10 percent.”

That would come to a relief to international investors who have so far shied away from Vaca Muerta due to high costs as well as heavy trade and currency controls.

Galuccio said it currently costs $13 million to $14 million to drill horizontal wells in Vaca Muerta, located in Patagonia.

YPF is building a plant near Vaca Muerta that is set to start refining raw yellowish sand mined from the southern province of Chubut into the fine gray sand used in fracking.

YPF says it has about 300 wells producing up to 45,000 barrels per day of oil and gas equivalent, a fraction of Vaca Muerta’s potential.

President Cristina Fernandez’s interventionist policies have scared the most risk-hungry companies out of making anything but foothold investments in what is viewed as one of the biggest shale reserves in the Western Hemisphere.

She is barred from running for a third term in the October general election. The three leading candidates to succeed her say they are more in favor of free markets.

Southern England ‘Brimming’ with Onshore Oil

Analysis of a well in southern England’s Weald Basin shows that the region could be brimming in onshore oil. So says junior exploration company UK Oil & Gas, which reported Thursday that US petrophysical analysis firm Nutech has estimated that the Horse Hill-1 well near Gatwick Airport, south of London, has total oil in place of 158 million barrels per square mile.

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Nutech’s report states that oil in place at the Horse Hill-1 well lies within a 653-foot aggregate net pay section, primarily within Argillaceous limestone and interbedded mudstones of the Kimmeridge Clay Formation as well as in the mudstones of the Oxford and Lias sections. Approximately 72 percent of the oil in place (114 million barrels of oil) lies within the Upper Jurassic Kimmeridge interbedded limestone and mudstone sequence.

The Horse Hill licenses cover 55 square miles of the Weald Basin. UK Oil & Gas holds a 20.36-percent interest in these licenses.

UK Oil & Gas CEO Stephen Sanderson commented in a company statement:

“We have been drilling for oil and gas onshore in the UK for over 100 years. There are a number of sites in the south of England that have been producing oil for many years with great care for the environment and with no impact on local communities.

“These initial results suggest a very large volume of oil in place, which could potentially help to stem the rise in oil imports and improve Britain’s energy security and balance of payments. Further appraisal work will be needed to test what could be economically and technically recoverable.”

That Horse Hill potentially contains a world-class resource contradicts a report issued in May last year by the British Geological Survey that estimated a reasonable central estimate for shale oil in the Weald region of England was just 4.4 billion barrels.

KrisEnergy Finds Hydrocarbons at Rossukon-3 Exploration Well Off Thailand

KrisEnergy Ltd. (KrisEnergy or the Company), an independent upstream oil and gas company, provided Tuesday an update on the Rossukon-3 exploration well in G6/48 in the Gulf of Thailand, which was drilled by the jackup Key Gibraltar (300′ ILC) following the successful evaluation of the Rossukon-2 and sidetrack wells in March.

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Rossukon-3 was drilled to a total depth of 7,497 feet (2,285 meters) measured depth, or minus 6,235 feet true vertical depth subsea (TVDSS). KrisEnergy’s preliminary interpretation of well logs indicates that the well intersected approximately 75 feet true vertical depth (TVD) of net oil-bearing sandstones and 49 feet TVD of net gas-bearing sandstones over several reservoir intervals. Water depth at the Rossukon-3 location is 208 feet. The well lies 1.2 miles (1.9 kilometers) west of the Rossukon-2 surface location and 1.1 miles (1.8 kilometers) northwest of the original Rossukon-1 discovery well, drilled in 2009.

Rossukon-3 will be plugged back and the G6/48 partners have agreed to immediately begin drilling the Rossukon-3ST sidetrack exploration well. Rossukon-3ST is planned to drill to a total depth of 6,689 feet (2,039 meters) measured depth (minus 4,500 feet TVDSS) at a maximum deviation of 74 degrees.

Chris Gibson-Robinson, director Exploration & Production, commented: “The three wells drilled so far in this campaign are promising and will increase the contingent resources in G6/48. Once Rossukon-3ST is completed, we will undertake a thorough technical review incorporating data from all the Rossukon wells, and the existing seismic data, to more fully assess the potential for commercial development in the future.”

G6/48 covers 218.5 square miles (566 square kilometers) over the Karawake Basin and lies to the north of the G10/48 license, where KrisEnergy is developing the Wassana oil field. KrisEnergy took over operatorship of G6/48 in May 2014. The Company holds a 30 percent working interest in the concession and is partnered by Northern Gulf Petroleum Pte Ltd with 40 percent and Mubadala Petroleum with 30 percent.

The Key Gibraltar jackup is owned by Shelf Drilling (Southeast Asia) Limited. KrisEnergy contracted the rig for a firm six months for its Thai drilling program, which includes the latest Rossukon series of wells in G6/48 and 15 development wells in the Wassana oil field.

Pancontinental Withdraws from Kenya’s Onshore Block 10B Project

Africa-focused Pancontinental Oil & Gas NL, a Western Australian petroleum exploration company, disclosed Wednesday that it has served a notice of withdrawal on BG Kenya L10B Limited (BG), the only remaining participant and operator of Kenya License L10B (L10B), from the Joint Operating Agreement with BG and from the PSC governing L10B.

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Pancontinental holds a 25 percent interest in L10B, while BG holds 75 percent.

License area L10B lies immediately to the south of area L10A, in which a joint venture also operated by BG Group (50 percent) drilled the Sunbird-1 oil discovery well in 2014. Pancontinental holds 18.75 percent in this license and PTTEP of Thailand holds 31.25 percent.

Pancontinental believes that it has sufficient exposure to the prospectivity of the area through its 18.75 percent interest in the adjoining Block L10A. The Blocks have similar geological features that in some cases straddle the permit boundary, while exploration in L10A is more advanced. The Company considers that the withdrawal is in the interest of prudent financial management, whilst maintaining a manageable and prospective exploration portfolio.

Essar Plans Exploration Drilling in Two Offshore Blocks in India, Vietnam

Essar Energy plans to press on with exploration drilling at its blocks in India and Vietnam in September-October as the firm steps up efforts to increase its crude oil production even as energy companies reduced capital expenditure in response to the slump in global oil prices that began in the second half of last year, a senior company official said, as reported in local daily The Economic Times Tuesday.

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“We will be drilling a couple of exploration wells in Mumbai offshore (in India) and Vietnam in the fair weather window later this year. Depending on the results of the initial drilling, we will decide how many wells we want to drill,” Manish Maheswari, CEO – Exploration and Production at Essar Energy’s oil and gas unit Essar Oil said.

The plan to proceed with exploration drilling at the two blocks comes after joint venture partners completed mapping the prospects based on 3D seismic data for these offshore blocks.

Essar Energy has a 30 percent stake in shallow water exploration block MBOSN-2005/3, located near the Mumbai High field offshore Mumbai, while state-owned Oil and Natural Gas Corp. Ltd. (ONGC) holds the remaining 70 percent interest.

The Indian firm hopes to capitalize on significantly lower cost for its exploration drilling campaigns as oilfield service providers have reduced costs by up to 30 percent in a bid to grab a slice of the shrinking market, he added.

“The E&P (exploration and production) sector has not seen any activity in India since 2010. We have assets at different stages and have prioritized certain assets. Now the focus is to ramp up production and convert these assets into mature producing properties,” Maheswari commented.

Over in Southeast Asia, Essar has a 50 percent interest in Block 114, while Italy’s Eni S.p.A. holds a 50 percent operating stake. The block is located in Song Hong Basin offshore Vietnam and the joint venture will drill two exploration wells as part of their production sharing contract commitment. Eni acquired the 50 percent interest from Essar in mid-2012.

Eland on Track to Drill More Wells Onshore Nigeria

Nigeria-focused junior producer Eland Oil & Gas reported Wednesday that it remains on track to start development drilling on its Opuama field during the third quarter of this year.

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The Opuama field is currently producing 3,100 barrels of oil per day, including 1,395 bopd that goes to Eland’s joint venture company Elcrest Exploration and Production Nigeria.

In 3Q 2015, Eland plans to start a drilling programme that will consist of seven wells. The firm said that these wells are “commercially robust” at an oil price of $50 per barrel.

Eland CEO George Maxwell commented in a company statement:

“We are incredibly pleased that we have begun this year so strongly, with very high consistency of production from Opuama. Our operational focus has given us this success and provides a consistent revenue stream and the basis for the company to deliver its 2015 work program.

“We do however continue with our cost reduction program to reduce operating expenses as far as possible and maximize the return on our capex investment.

“The planned work program, with the mixture of re-entry and new development wells, will result in 2015 being a transformational year for Eland with material increases in production and revenues.”

Eland also said it had a cash balance of $8.2 million as at March 1 and is expected to receive a further $2.4 million before the end of March for settlement of oil cargoes.

Report: Kuwait Discovers 4 New Oil Fields In Kingdom

KUWAIT CITY (AP) — Kuwait’s state news agency says the state-run Kuwait Oil Co. has discovered four new oil fields.

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The Kuwait News Agency quoted KOC’s CEO Hashim Hashim on Sunday as saying that the discovery of these fields will “fortify Kuwait’s standing as an international producer of oil.”

Hashim said that the discovery is the culmination of a two-year oil exploration mission. He noted that one of the reservoirs contains light crude oil, the first such reservoir in Kuwait.

He told KUNA that this will increase Kuwait’s oil reserves and further strengthen its position among the world’s top exporters of oil.

There was no information on the size of the fields in the north and west of the OPEC nation.

Cue Energy Takes Full Ownership of Kutei Basin’s Mahakam Hilir PSC

Australia’s Cue Energy Resources Limited disclosed Tuesday that it has completed the acquisition of 100 percent of SPC Mahakam Hilir Pte Ltd, which holds 60 percent of the Mahakam Hilir Production Sharing Contract (PSC) in the prolific Kutei basin, onshore Kalimantan, Indonesia. Cue now holds a 100 percent interest in the PSC.

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As part of an internal review of permit data, Cue has identified a robust drill-ready oil prospect, Naga Selatan -2 (Southern Dragon) which has encouraged Cue to move to a 100 percent interest in the permit.

In Cue’s estimate, this oil prospect could contain 25 million barrels of recoverable oil and lies along trend from the large Sei Nangka and South Pelarang oil fields. The multiple targets are shallow, located at approximately 1,000 feet-3,000 feet TVD.

Drilling program preparations have commenced and the well is planned for the third quarter of 2015. This acquisition complements the continuing expansion of our Indonesian acreage portfolio and marks Cue’s first entry as a drilling operator.

WHL Energy Upbeat About Junon Resources Potential offshore Seychelles

Australian energy company WHL Energy Limited (WHL Energy or the Company) provided Thursday the following update to the Prospective Resources in our Seychelles acreage following interpretation of a preliminary PreSTM volume of the Junon 3D seismic survey.

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Detailed interpretation of the Junon PreSTM 3D data by WHL Energy has firmed up key prospects in the Junon area which were initially identified by the previous regional 2D seismic survey, enabling a revision to Prospective Resources for these prospects.

Seychelles Best Estimate Prospective Resources

Junon 3D Seismic Prospects

  • Prospect
    • Junon South East – 214 million barrels
    • Junon Central – 209 million barrels
    • Junon South – 55 million barrels
    • Junon West – 53 million barrels

2D Seismic Prospects and Leads

  • Prospect/Lead
    • Junon NW – 171 million barrels
    • Junon NE – 518 million barrels
    • Beau Vallon Central – 451 million barrels
    • Beau Vallon South – 207 million barrels
    • Beau Vallon East – 225 million barrels
    • Lead C – 178 million barrels
    • Lead L – 84 million barrels

Four key structures have been high-graded within the Junon 3D area, being the Junon South East, Junon Central, Junon South and Junon West prospects. Prospective Resources for these Junon 3D prospects are tabulated, along with key leads outside the Junon 3D seismic survey area.

Arising from the 3D seismic interpretation, the Junon Central and Junon South East prospects have developed into better defined and very substantial opportunities.

Commenting on the results, WHL Energy Managing Director, David Rowbottam said: “It is pleasing to report continued strong progress with our Seychelles asset. Our in-depth work has confirmed Junon Central and Junon South East as both being highly material opportunities with best estimate Prospective Resources in excess of 200 million barrels, along with follow-up potential at Junon South.”

Baraka Applies to Renew Exploration Permit EP128 in NT’s Georgina Basin

Baraka Energy & Resources Ltd. (Baraka or the Company) announced Tuesday that it has, after an extended period of discussions and communications, together with the support of Petrofrontier Corp. and Statoil Australia Theta B.V. (Statoil), applied for the renewal of Exploration Permit EP128, being the most northerly of the two permits Baraka has an interest in, in the Georgina Basin, Northern Territory, Australia.

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Both Petrofrontier and Statoil, as a result of not discovering hydrocarbons of sufficient quantity, quality or sufficient porosity from the limited wells drilled and completed, have elected to withdraw from both permits, for their respective reasons.

It is important to note that the McIntyre 2H well, initially drilled by Petrofrontier on EP127, indicated high gas readings during drilling, however after fraccing this was unable to be investigated further due to the well producing excessive water and hydrogen sulphide (H2S), and was suspended for safety reasons.

Statoil were predominantly seeking a large unconventional shale basin similar to those basins in U.S./Canada, in an area representing some 13 million acres, including the 2 permits controlled by Petrofrontier and Statoil. Only 5 wells were drilled in the eastern area of all the permits, and although they were unsuccessful, this leaves an enormous area yet to be explored.

EP127 and EP128 combined represent some 8 million of those acres, of which Baraka previously had a 25 percent working interest.

Based on independent oil and gas consultant reports from RISC and Ryder Scott, both of which are available on the Company’s website, there are a number of conventional oil and gas targets throughout the basin.

Directors of Baraka travelled to Darwin and met with various parties within the Department of Mines and Energy, to discuss Baraka pursuing renewal of EP128 in its own right, and were provided a very courteous and supportive audience. As a result, Baraka appointed an experienced law firm and a tenement administrator in Darwin, to assist in the application to renew the permit in the name of Baraka as the 100 percent holder. This application has recently been lodged with supporting documentation.

Subject to the success of the renewal application with Department of Mines and Energy, the Company will make further announcements regarding its intentions on this permit going forward. Baraka has not been informed as to the timing of any approval period as the license does not expire until June 13, with all commitments having been met to that date.

Based on both Petrofrontier and Statoil’s announcements and continued discussions with Baraka, it is expected that Baraka will also lodge an application for renewal of EP127 in its own right as 100 percent permit holder in due course. EP127 does not expire until Dec. 13 and once again, all commitments have been met to that date.

As previously announced, Baraka has been approached by a Canadian group that has for some time expressed an interest in pursuing the conventional targets within Baraka’s permits, and we would expect to pursue that interest if both permits are renewed.

Whilst the world’s energy and resource companies are suffering low oil, iron ore, coal and other commodity prices, history shows that these are only a temporary hiccup in the world’s growth, and will result in the same recovery of prices and demand as every other recession and or commodity cycle in the past 40 years.

The board of Baraka would like to once again thank Petrofrontier and Statoil for their courage and energy in committing substantial funds to pursuing the basins unconventional prospects, regardless of results during their programs. Baraka will, in addition to pursuing the renewal of these permits and seeking farm in partners, continue to assess a number of other projects and ventures for the benefit of its shareholders, including its current assets, and seek to create cash generating opportunities as soon as realistically possible.