12 December 2014
Cambay Basin demonstrates strong economics
· Cambay demonstrates robust economics, despite the recent sharp drop in oil prices
· Initial modelling indicates gas only well is economic, oil production provides significant upside value
· India domestic gas demand to continue to outstrip supply
· Buyer bid system for gas offtake results in higher prices
· Low commercialisation costs with existing infrastructure in place
Oilex Ltd (ASX: OEX, AIM: OEX) is pleased to confirm that the Cambay Field is expected to have robust economics, despite the recent sharp drop in oil prices.
Initial production profiles modelled by the Company for the next three horizontal wells using the Cambay-77H data provide the following indicative value metrics per well:
Well configuration |
Product slate |
10 Yr Assumed recovery (BOE) |
Payback (Mths) |
NPV10/BOE |
700m lateral with 9 fracs |
Gas |
531,000 |
~48 |
$1 |
700m lateral with 9 fracs |
Gas + Oil |
680,000 |
~22 |
$15 |
1,400m lateral with 18 fracs |
Gas + Oil |
>1,000,000 |
~12 |
>$20 |
The above modelling assumes a US$70 / Bbl oil and US$8 / MSCF gas price. The NPV calculation assumes utilisation of existing tax losses. Full field economics will be assessed after completion of the engineering studies, including determining the appropriate throughput rate for gas processing facilities. A well with 700m lateral and 9 fracs compares favourably with Oilex's previous commercial assessment for Cambay.
The "700m gas only" well shows the economic impact of no revenue from concurrent oil production. Initial modelling indicates that, even a gas well with no associated liquids is economic. A further positive from analysis of the Cambay-77H data is the significantly higher oil gas ratio (OGR), which has a material positive impact on the revenue stream from future Cambay horizontal wells.
The well economics are underpinned by the significant excess of demand over supply within the Indian domestic economy, which is forecast to grow. According to the US Energy Information Agency:
· India is a significant importer of crude oil, as the country's demand growth continues to outstrip domestic supply growth; and
· Natural gas serves as a substitute for coal in electricity generation and fertiliser production in India. The country began importing liquefied natural gas in 2004 and increasingly relies on imports to meet domestic natural gas needs.
Oilex has concluded 2 gas sale agreements (GSA) to date. Gas sale contracts are conducted via a bid system, with buyers submitting offers to purchase via a tender process. Given the demand for gas by nearby industrial users, strong pricing is secured, above the floor price recently established by the Indian Government.
Existing industry located within 15km of the Cambay Field means very low capital cost is associated with sales of gas to the local market and the tie-in to existing gas transmission pipeline network. The network has excess capacity for additional gas that can be used for gas from the Cambay Field.
Managing Director of Oilex, Ron Miller, said;
"The robust indicative economics of the Cambay Field remain, despite the sharp decline in oil prices. The fall in the oil price does impact the total revenue generated by the Cambay Field, but this is more than offset by the 250% increase in the oil gas ratio. The premium gas market in India also means that the Cambay Field is economic even when we exclude oil revenues from our modelling. "
For and on behalf of Oilex Ltd
Ron Miller
Managing Director
For further information, please contact:
Oilex Ltd Ron Miller, Managing Director Email: [email protected] Tel: +61 8 9485 3200 Australia |
Strand Hanson Limited Nominated Adviser and AIM Broker Rory Murphy/Ritchie Balmer Email: [email protected] Tel: +44 20 7409 3494 UK |
Tavistock Communications Ed Portman Email: [email protected] Tel: +44 207 920 3150 UK |
Qualified Petroleum Reserves and Resources Evaluator statement
Pursuant to the requirements of Chapter 5 of the ASX Listing Rules, the information in this report relating to petroleum reserves and resources is based on and fairly represents information and supporting documentation prepared by or under the supervision of Mr. Peter Bekkers, Chief Geoscientist employed by Oilex Ltd. Mr. Bekkers has over 17 years experience in petroleum geology and is a member of the Society of Petroleum Engineers and AAPG. Mr. Bekkers meets the requirements of a qualified petroleum reserve and resource evaluator under Chapter 5 of the ASX Listing Rules and consents to the inclusion of this information in this report in the form and context in which it appears. Mr. Bekkers also meets the requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies and consents to the inclusion of this information in this report in the form and context in which it appears.
LIST OF ABBREVIATIONS AND DEFINITIONS
API |
A unit of measurement established by the American Petroleum Institute (API) that indicates the density of a liquid. Fresh water has an API density of 10. |
Associated Gas |
Natural gas found in contact with or dissolved in crude oil in the reservoir. It can be further categorized as Gas-Cap Gas or Solution Gas. |
Bbls |
Barrels of oil or condensate. |
BBO |
Billion standard barrels of oil or condensate |
BCF |
Billion Cubic Feet of gas at standard temperature and pressure conditions |
BCFE |
Billion Cubic Feet Equivalent of gas at standard temperature and pressure conditions. |
BOE |
Barrels of Oil Equivalent. Converting gas volumes to the oil equivalent is customarily done on the basis of the nominal heating content or calorific value of the fuel. Common industry gas conversion factors usually range between 1 barrel of oil equivalent (BOE) = 5,600 standard cubic feet (scf) of gas to 1 BOE = 6,000 scf. Oilex currently uses 5,800 scf = 1 BOE |
BOPD |
Barrels of oil per day. |
bwpd |
Abbreviation for barrels of water per day, a common unit of measurement for the daily volume of produced water. |
Condensate |
A natural gas liquid with a low vapor pressure compared with natural gasoline and liquefied petroleum gas. Condensate is mainly composed of propane, butane, pentane and heavier hydrocarbon fractions. The condensate is not only generated into the reservoir, it is also formed when liquid drops out, or condenses, from a gas stream in pipelines or surface facilities. |
Core Analysis |
Laboratory study of a sample of a geologic formation, usually reservoir rock, taken during or after drilling a well. Economic and efficient oil and gas production is highly dependent on understanding key properties of reservoir rock, such as porosity, permeability, and wettability. Geoscientists have developed a variety of approaches, including log and core analysis techniques, to measure these properties. Core analysis is especially important in shale reservoirs because of the vertical and lateral heterogeneity of the rocks. Core analysis can include evaluation of rock properties and anisotropy; organic matter content, maturity, and type; fluid content; fluid sensitivity; and geomechanical properties. This information can be used to calibrate log and seismic measurements and to help in well and completion design, well placement, and other aspects of reservoir production. |
CO2 |
Carbon dioxide |
Contingent Resources |
Those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality. Contingent Resources are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterised by their economic status. |
Hydraulic Fracturing |
http://www.energy4me.org/hydraulicfracturing/inside-fracturing/tour-fracturing-site/ |
OGR |
Oil to gas ratio in an oil field, calculated using measured natural gas and crude oil volumes at stated conditions. The gas/oil ratio may be the solution gas/oil, symbol Rs; produced gas/oil ratio, symbol Rp; or another suitably defined ratio of gas production to oil production. Volumes measured in scf and bbls. |
H2S |
Hydrogen sulphide. An extraordinarily poisonous gas with a molecular formula of H2S. At low concentrations, H2S has the odor of rotten eggs, but at higher, lethal concentrations, it is odorless. H2S is hazardous to workers and a few seconds of exposure at relatively low concentrations can be lethal, but exposure to lower concentrations can also be harmful |
LPG |
(Liquefied Petroleum Gas) Gas mainly composed of propane and butane, which has been liquefied at low temperatures and moderate pressures. The gas is obtainable from refinery gases or after the cracking process of crude oil. Liquefied petroleum gas is also called bottle gas. At atmospheric pressure, it is easily converted into gas and can be used industrially or domestically. The term is commonly abbreviated as LPG. |
mD |
(Millidarcy) A darcy (or darcy unit) and millidarcy (md or mD) are units of permeability, named after Henry Darcy. They are not SI units, but they are widely used in petroleum engineering and geology. Like other measures of permeability, a darcy has dimensional units in length². |
MSCFD |
Thousand standard cubic feet (of gas) per day |
MMscfd |
Million standard cubic feet of gas per day. |
MMbbls |
Million barrels of oil or condensate. |
MMBO |
Million standard barrels of oil or condensate |
MMSCFD |
Million standard cubic feet (of gas) per day |
MMscfe/d |
Million standard cubic feet equivalent of gas a day (~172.4 bbls of oil per day using 5,800 scf per bbl) |
MMscfe |
Million standard cubic feet equivalent of gas (~172.4 bbls of oil using 5,800 scf per bbl) |
PSC |
Production Sharing Contract |
psig |
pounds per square inch gauge |
MD |
Measured Depth. |
Prospective Resources |
Those quantities of petroleum which are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations. |
Plug and Perf |
The wellbore for a plug and perf job is generally composed of standard steel casing, cemented or uncemented, set in the drilled hole. Once the drilling rig has been removed, a coiled tubing unit or wireline truck is used to perforate near the bottom of the well, and then fracturing fluid is pumped. Then the coiled tubing unit or wireline truck sets a plug in the well to temporarily seal off that section so the next section of the wellbore can be treated. Another stage is pumped, and the process is repeated along the horizontal length of the wellbore. |
Reserves |
Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Proved Reserves are those quantities of petroleum, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods and government regulations. Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. Possible Reserves are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recoverable than Probable Reserves. P90 refers to the quantity for which it is estimated there is at least a 90% probability the actual quantity recovered will equal or exceed. P50 refers to the quantity for which it is estimated there is at least a 50% probability the actual quantity recovered will equal or exceed. P10 refers to the quantity for which it is estimated there is at least a 10% probability the actual quantity recovered will equal or exceed. |
SCF/BBL |
Standard cubic feet (of gas) per barrel (of oil). |
Tight Gas Reservoir |
The reservoir cannot be produced at economic flow rates or recover economic volumes of natural gas unless the well is stimulated by a large hydraulic fracture treatment, a horizontal wellbore, or by using multilateral wellbores. |
Undiscovered in place volume |
Is that quantity of petroleum estimated, as of a given date, to be contained within accumulations yet to be discovered |
