Category Archives: Energy

Sonoro Energy Wins Selat Panjang PSC Tender in the Central Sumatran Basin

Sonoro Energy Ltd (TSXV: SNV) with it local partner PT Menara Global Energi has won the Selat Panjang PSC in the 2019 Conventional Bid Round in Indonesia.

Selat Panjang PSC Block in the Central Sumatran Basin

Deputy Minister of Energy and Mineral Resources Arcandra Tahar announced the winner of 2019 Phase I Oil and Gas Working Area Offers with Regular Auction mechanism at EMR Ministry Building in Jakarta, on Tuesday (05/07). Photo by TheInsiderStories.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar announced the winner of 2019 Phase I Oil and Gas Working Area Offers with Regular Auction mechanism at EMR Ministry Building in Jakarta, on Tuesday (05/07). Photo by TheInsiderStories.

Indonesian Ministry of Energy and Mineral Resources (MEMR) announced on 7th May 2019 that the Sonoro Energy Ltd-PT Menara Global Energi consortium was the winner of the 2019 Phase I Oil and Gas Working Area Offer on the Selat Panjang PSC area in the Central Sumatra Basin.  The total commitment value and signature bonus was US$ 116.7 million.  The PSC tender process is important to the Government of Indonesia as during the last two years 14 blocks were successfully tendered which resulted in signature bonuses totaling US$865 million and Definitive Work Commitments totaling US$2.13 billion.

It is unlikely that the PSC will be formalized and executed before the end of Ramadan on June 5th, 2019.

Terms
  • Sonoro has a 25% interest in the project with an option for up to an additional 24%.
  • Menara Global Energi has an initial 75% interest and shall be responsible for the signature bonus and for funding the first year G&G program.  Sonoro interest to be repaid on terms to be agreed.
Tender Bid
  • Signature Bonus: US$5 million
  • G&G Study
  • 2D: 500 line km
  • 3D: 200 km2
  • 6 wells

The 923 km2 Selat Panjang PSC is situated in Riau province, Central Sumatra and is approximately 925 km from Jakarta and 110 km from Pekanbaru (capital city of Riau Province).

In 2015 the Indonesian Ministry of Energy awarded  the Selat Panjang PSC, then totalling 1,316 km2 to Petroselat NC Ltd. part owned by Petrochina International.  The agreed work program included a G&G Study and data compilation, 2D seismic and 1 exploration well.  The PSC was terminated by the Ministry in 2018 and the development program proposed by the previous operator was not implemented.

The previous operator reported that the PSC had produced since 1994 with average annual production of 100,000 barrels with remaining 2P reserves of 7 MMBO.  Petroselat identified 7 leads and prospects on the PSC with reported potential for 320 MMBO and 1.5 Tcf.

The Central Sumatran Basin
North and Central Sumatra Basins and fields. These basins formed in a back-arc environment.

The Central Sumatra Basin along with the North and Southern Sumatra Basins formed as a result of back-arc extension resulting from the subduction of the Indian oceanic plate beneath western Indonesian portion of the Sundaland Plate.  During the Eocene to Early-Oligocene, extension resulted in rifting which generated a series of half-grabens.  These grabens filled with syn-rift nonmarine facies, including fluvial, del­taic, marginal lacustrine sandstones, and shallow to deep-water lacustrine shales.  With the cessation of rifting, thermal relaxation resulted in a sag phase which increased accommodation and saw further deposition and increased thermal maturity of the lacustrine source rocks.  Renewed subduction or more likely a change in subduction rate saw compression in the back-arc environment from the middle Miocene to the Holocence producing many structural traps for conventional hydrocarbon accumulations.

Stratigraphic sections of southern and western Indonesian basins. Doust and Noble, 2008 Petroleum Systems of indonesia
The four petroleum systems typical of SE Asian Tertiary basins and their relationship to basin stages Doust & Noble 2008

Reservoirs formed in upper Pematang Group (Palaeogene) non-marine sandstones however the principal reservoirs in this system formed in the Early Miocene Sihapas Group marine sandstones.  The Pematang Group was deposited in a series of small en-echelon grabens which have a Lower Red Bed fluvial-alluvial unit, overlain by the Brown Shale lacustrine unit and capped by the Upper Red Bed unit.

The basal transgressive unit of the Sihapas Group, the Menggala Formation consists of well-sorted quartzose to sub-arkosic sandstones which typically constitute more than 50% of the formation.  The Menggala Formation has an average porosity of >20% and an average permeability of 1500 mD.

An abnormally high thermal gradient has resulted in a shallow oil window with the Oligocene Brown Shale of the Pematang Group being the principal petroleum source rock.  The Brown Shale Formation (lacustrine) of the Pematang Group with the Sihapas Group sandstones is one of the most important lacustrine oil systems in SE Asia.  Source Rock summary

  • Principle source rock is the Pematang lacustrine brown shale;
  • Type 1 source rock average TOC 2-23%  with an average of 4%(Williams et al 1985, Yarmanto et al 1995 & Katz abd Dawson 1997).  HI 200-950;
  • Derived oil gravity API 20° to 47°; <2% S; Pour Point 4 to 46º and paraffinic

The Pematang reservoirs are generally small and occur with the rift basin.  The giant fields of Minas and Duri with Sihapas reservoirs occur principally along the eastern margins of the rift basins.  Most of the oil-fields are located in drape structures of basement highs along the eastern flanks of the half-grabens up-dip of the Pematang formation source rocks while others are related closure generated by basin bounding faults.  The lack of gas within the fields of the Central Sumatra Basin is notable reflecting the maturity of the Pematang-Sihapas system and the dominance of lacustrine source rock.

With an excellent source rock package and an anomalously high thermal gradient the Central Sumatra Basin is a prolific producer from shallow depths and has the highest petroleum endowment of the major basins in Asia-Pacific.  25 billion barrels STOIIP has been identified within the Central Sumatra Basin of which 4 billion and 8 billion barrels are in the Duri and Minas fields respectively, making them amongst the largest in SE Asia.

With an excellent source rock package and an anomalously high thermal gradient the Central Sumatra Basin is a prolific producer from shallow depths and has the highest petroleum endowment of the major basins in Asia-Pacific

What if Green Energy Isn’t the Future

Oil field rig with casing ready for well completion ahead of perforation and testing program. Copyright Cmi Capital 2012

What’s Warren Buffett doing with a $10 billion bet on the future of oil and gas, helping old-school Occidental Petroleum buy Anadarko, a U.S. shale leader? For pundits promoting the all-green future, this looks like betting on horse farms circa 1919.

  • Warren Buffet finances Occidental acquisition of Anadarko – US$10 billion;
  • Market sentiment is broadly bearish on hydrocarbons. The oil and gas share of the S&P 500 Energy index is now US$225 billion, less than 1% of the index and the lowest in more than 40 years;
  • What happens if investments in renewables stutters, subsidies evaporate, or renewable delivery fails?
  • Mills states that the prevailing wisdom has renewables adding 250% more energy to the world in the next 20 years, more than shale has added in the past 15 years;
  • Oil and gas demand continue to rise and is forecast to continue this trend albeit at a more muted rate;
  • All the growth predictions assume that 75% of the renewable growth will come from the least wealthy countries, the emerging economies. Mills concludes this is unlikely unless radical cost reductions evolve.  Note that none of the wealthy countries met their green targets but that energy production was driven by increases in fossil fuel production.  70% of the growth was increased fossil fuel production;
  • “The reason? Using wind, solar and batteries as the primary sources of the nation’s energy supply remains far too expensive.”  Any mention of subsidy reduction exposes the full fury of the green lobby … who receive ample funding from the renewables industry!
  • Already countries are reducing or removing renewable subsidies usually the result of unstable energy supplies, for example Sweden and Australia;
  • In the USA utilities have been adding massive fossil fuel burning diesel generators as backup to unreliable wind and solar, with little fanfare or comment;
  • Will electric cars solve the energy gap? Even a 100-fold increase in electric vehicles would only replace 5% of global oil demand of two decades. 

‘Green advocates can hope to persuade governments – and thus taxpayers – to deploy a huge tax on hydrocarbons to ensure more green construction.  But there is no chance that wealthy nations will agree to subsidize expensive green tech for the rest of the world.  And we know where the Oracle of Omaha has placed his bet.”  Full Article

Bualuang North Field Development – Gulf of Thailand

Western Gulf of Thailand showing, depth to basement, oil and gas field, wells and pipelines.

Solstad Offshore ASA has been awarded a contract by Ophir Thailand (Bualuang) Limited to perform the offshore installation of the Bualuang Charlie wellhead platform structure as part of the Bualuang Phase 4B Development Project.  The Charlie platform will have 12 slots at full production will increase field production to 11,000 BOPD.

Derrick Lay Barge “Norce Endeavour”

The project is located in the Gulf of Thailand and comprises the installation of a bridged-linked wellhead platform structure along with the retrofitting of extension structures to existing in-field platforms. Offshore activities are planned to commence in July 2019 and will be performed using the Derrick Lay Barge “Norce Endeavour”. Solstad Offshore will perform all project management, engineering and installation activities from its offices in Singapore.

Bualuang Oil Field

The Bualuang oil field in the Gulf of Thailand has been on-stream since 2008. The field was initially thought to contain 15 mmbo of 2P reserves and have a productive life of approximately five years. However, the field has undergone numerous reserve upgrades and year-end 2018 it had produced over 35 million barrels of oil, with a further 27 mmbo of 2P reserves and 10.3 mmbo of 2C resource.

Bualuang North Platform

  • The Bualuang field has been on-stream since 2008
  • Stable production with over 99% uptime in 2018.  7,800 BOPD during 2018, to be increased to 11,000 BOPD
  • OPEX US$13/BOPD increase to US$16 BOPD in 2018.
  • A facilities debottlenecking project in 2016 increased water handling capacity, and therefore allowed for increased rates of oil production
  • A three well infill drilling campaign in 2017 saw two wells in the deeper T2 reservoir and and infill well under the platform guided by data from the Ocean Bottom Node seismic survey completed in 2015.
  • Phase 4 commenced in 2018 with drilling of three new wells and four workovers.
Phase 4B Development

Charlie Platform and modifications in color, with existing Bauluang North production infrastructure shown in grey.

  • A third platform with 12 slots allowing expansion of water disposal to 100k BPD;
  • 10 slots to be used for increased production with conversion of some wells on the Bravo platform to water disposal.
  • CAPEX: US$138 million
  • Development drilling from July 2019 with first oil from Charlie in October 2019
Medeco to Acquire Ophir Energy

On 30 January 2019, the boards of Medco, Medco Global and Ophir announced that they had reached agreement on the terms of a recommended acquisition pursuant to which Medco Global will acquire the entire issued and to be issued ordinary share capital of Ophir for GBP 0.55 per share (later revised upwards to GBP 0.575).  This all cash bid valued the company at US$ 550 million.

A number of activist institutional investors were unhappy with the bid and on 8 March 2019, the Ophir Board received an unsolicited and highly preliminary indication of interest from Coro Energy PLC regarding a possible offer for the entire issued and to be issued share capital of Ophir.  Coro proposed that Ophir Shareholders would receive 40 pence in cash, and, in addition, shares in Coro for each Ophir Share, resulting in an ownership by Ophir Shareholders of between 85 per cent. and 95 per cent. of the enlarged company.  The cash component would be funded with debt.

Following a modest increase in the offer price by Modeco, Coro withdrew its offer after discussions with their financiers, Sand Grove Capital Management.

Note: Cmi Capital holds shares in Ophir Energy.

Novel diamond composite drill bit to improve steerability

Schlumberger introduces new and novel diamond composite drill-bit which allows for deeper cutting –  which will improve steerability on the curve.

The  distinctive geometry of Hyper* hyperbolic diamond cutting elements that cut 20% deeper into rock compared with conventional polycrystalline diamond compact (PDC) cutters. A thicker, precision-molded diamond table makes the Hyper element tougher and more durable for drilling soft and plastic rock formations, while armored cutting edges withstand high-impact transitions.

Additionally, bit balling is mitigated by the chip-breaking profile at the center of the element, which improves cuttings removal during drilling. With the combination of these features, the HyperBlade bit maintains steerability and directional tracking, and increases average ROP by more than 20% compared with conventional PDC cutters.

The HyperBlade bit has undergone extensive field testing in North America, specifically in the Denver-Julesburg and Appalachian Basins. In the Marcellus Formation in northern Pennsylvania, the HyperBlade bit drilled an 8 ½-in section with a measured depth of 6,891 ft in 16.6 drilling hours. The operator achieved an on-bottom ROP of 415 ft/h, resulting in a 62% improvement compared with offset runs using conventional PDC bits.

Coal Boom in Australia

Australia is on the brink of opening up a massive, untapped coal province after Adani committed to begin construction of its ­controversial Carmichael mine project in central Queensland befor­e Christmas and the approval by the Queensland Government of the Mac-Mines coal mine

After almost a decade of ­delays, legal challenges and protest­s, the Indian conglomerate is planning to begin exporting high-quality thermal coal from the Galilee Basin, west of Mackay, by the end of 2020.

Adani’s decision to self-fund a scaled-down version of its original mine-rail proposal — involving what would have been Australia’s biggest-ever coalmine — could pave the way for five other propos­ed mines in the basin. Its planned rail link to the Abbot Point port will be opened for use to Adani’s rivals, with an initial coal-hauling capacity of 40 million tonnes a year that could be doubled within a few years.

Last week, Queensland’s Co-ordinator-General approved the proposed $6.7 billion Chinese-backed MacMines coalmine in the Galilee Basin.  Read the Mac Mines EIS here.

china-stone-coal-project-eis

 

 

Coal Boom – The Australian

Science supports hydraulic fracturing, moratorium lifted on existing projects

After much lobbying APPEA has announced the Western Australian Government’s decision to lift the hydraulic fracturing moratorium on existing onshore gas projects.

How many studies need to be done to confirm that fracking kilometres beneath the surface of the planet has no material impact on the surface or the near surface waters?  We all know this has nothing to do with actual environmental impact and everything to do with a  small subset of the left that detests Capitalism  – the one “ism” that has made the world a better place as distinct from the others that have merely killed tens of millions.

Buru Energy fracking operation on the Valhalla North well-site in the Kimberley region of Western Australia

“The independent scientific inquiry has confirmed that properly regulated, hydraulic fracturing is a safe practice.  Hydraulic fracturing has been used safely in Western Australia since 1958,” said APPEA Chief Executive Dr Malcolm Roberts.

“The inquiry shows there is no environmental or public health justification for maintaining the moratorium.  The inquiry also rejects claims that onshore projects will mean a significant increase in emissions.

“While the industry would have preferred the removal of the moratorium across the state, this decision will give communities in regional WA the choice to support local projects and jobs.

“More than any other state, WA relies on investment in resource projects to sustain jobs and economic growth.  The government has made the right decision to respect the substantial investments already made by projects in the Kimberley region and the Perth basin.

Dr Roberts said prohibiting hydraulic fracturing would have crushed the viability of some of these projects, damaging WA’s reputation as a safe place for investment.

“The government has added a new regulatory requirement which will only allow these projects to use hydraulic fracturing for producing gas with the approval of the landowner,” Dr Roberts said.

“The industry respects that we operate on someone else’s land to develop a natural resource owned by the community.

“WA producers have close working relationships with traditional owners and pastoralists.

“During the inquiry, many regional communities expressed strong support for local gas projects.  The right of these communities to make their own decisions must be respected, including by anti-gas activists.”

Absurdly Restrictive Rules Hamper Fracking – Increasing costs and Reducing Efficiency

Cuadrilla’s Fracking Operation Credit: The Times

Financial Time October 31st, 2018

The head of the energy company that is seeking to become the first in the UK to start commercial fracking for gas has warned the government that its regulatory system risks “strangling” the nascent industry.

Francis Egan, chief executive of Cuadrilla, called on the government to relax operating rules that have forced the company to halt work several times after it unleashed earth tremors at its fracking site in northern England.

Fracking has revolutionised the US energy industry, and Cuadrilla is hoping to replicate this success in the UK, although it has encountered strong opposition from environmental protesters worried about pollution and earthquakes.

Since it began fracking tests on October 15 at its Little Plumpton site near Blackpool, Cuadrilla has caused 31 tremors, including three that were of sufficient magnitude under its operating rules to require the company to stop work.

Mr Egan said the government needed to move “within weeks” to relax the rules covering Cuadrilla or it may never discover if the UK’s shale gas resources are commercially viable.

“It could be strangled before birth, this thing,” he told the Financial Times.

Hydraulic fracturing — or fracking — involves pumping water, sand and chemicals deep under the ground at high pressure to release gas from rock formations, often in wells that run horizontally rather than vertically.

Under Cuadrilla’s operating licence, the company has signed up to a so-called traffic light system devised by the government that requires it to stop work if activity above 0.5 on the Richter seismic scale — a level imperceptible to humans — is detected.

Over the past two weeks, three tremors measuring more than 0.5 have been recorded — the highest one being 1.1. These three constitute “red lights” that require a halt to operations.

Mr Egan said the government should allow Cuadrilla to maintain operations amid tremors measuring up to 2.0 on the Richter scale — a level he insisted would pose no risk of damage to the surrounding area.

Other countries including Canada and the US allow seismic activity well above 2.0, he added.

Read Full Text

2TW of Coal Fired Power to Derail Climate Targets

Coal fired Power Plant, Credit: African Briefing

Financial Times, 31 October 2018

Leslie Hook, David Sheppard and Myles McCormick

A fleet of new coal plants in Asia threatening to derail global emissions targets has exposed the growing “disconnect” between energy markets and climate goals.

Fatih Birol, head of the International Energy Agency, said the growth of coal-fired power in Asia was worrying because the new plants would “lock in the emissions trajectory of the world, full stop”.

Asia has 2,000GW of coal-fired power plants that are operating or under construction — more than 10 times as much as the EU — and many of them are inefficient plants.

While the coal fleets in the US and Europe are older, 42 years on average, and nearing the end of their life, Asia’s coal plants are just 11-years-old on average and most still have decades left to operate.

Energy-related carbon dioxide emissions ticked up 1.4 per cent last year, following several years of staying flat, and are set to rise again in 2018 owing to greater demand for fossil fuels. Asia accounted for two-thirds of the growth in emissions last year.

Last year China’s coal-fired power generation grew 4 per cent, while India’s rose 13 per cent, according to IEA data. The rate of investment in the construction of new coal-fired power plants, however, also slowed down last year, according to the agency………

Read full Text

 

 

Madagascar announces 2018-19 offshore licensing round

OMNIS, in partnership with TGS and BGP, announce a licensing round in Madagascar, to be launched at Africa Oil Week, 5-9th November 2018.

Exploration in Madagascar began in the early 20th century with the discovery of heavy oil-rich sedimentary basins in the west, however this frontier region remains relatively under-explored. The Island shares a maritime boundary with Mozambique, which is in the same oil province where large quantities of natural gas have been discovered. Studies conducted in collaboration with TGS and BGP have resulted in new data that suggest there is significant potential for future discoveries both on and offshore.

“With the aim of intensifying offshore exploration activities, we are delighted to announce that OMNIS will be inviting investment from interested parties, during a licensing round to start in November 2018. We are working together with TGS and BGP to create an attractive environment for exploration in the offshore, and we are confident that this will signal the start of renewed investment for the upstream oil sector in Madagascar,” Voahangy Nirina Radarson, General Manager of OMNIS, commented.

We are looking for an industry partner who can leverage our local knowledge and presence in Madagascar to secure some of the most prospective offshore acreage in East Africa.  Email:  admin.mdg@cmi-capital.com 

renewables struggle without subsidies

Without subsidies and the ongoing presence of backup power based on fossil-fuel generation, the outlook for more renewable energy in Australia is extremely uncertain. Indeed, without the intervention of governments, the salad days for renewable energy will quickly fade.

The Australian 1st September, 2018

Judith Sloan

One of the most astute investors in the world is Warren Buffett. Since 2004 his company, Berkshire Hathaway, has invested more than $US17 billion in renewable energy, predominantly wind farms. In case you think Buffett is some bleeding-heart global warming believer, here is his explana­tion for the investment: “I will do any­thing that is basically covered by the law to reduce Berkshire’s tax rate … We get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Under the US production tax credit scheme, American taxpayers forked out more than $US14bn to renewable energy operators between 2014 and last year. The scheme provides for a tax credit of $US23 per megawatt hour and each project can claim this credit for 10 years. Unfortunately for the renewable energy sector, the scheme is being phased out.

Moreover, with the dramatic cut to the federal company tax rate (from 35 per cent to 21 per cent) implemented by the Trump administration, the value of tax credits for existing renewable energy schemes suddenly has dropped.

Just recently the plan to construct the largest wind farm in the US, to be located in Oklahoma, has been shelved. The business case for the project just didn’t stack up without the tax credits. Its loca­tion in a remote, albeit windy, part of the country meant that close to 900km of transmission lines would need to be built. The cost of and local opposition to the erection of the pylons were further factors killing the project.
It’s early days, but there are indications that investment in renewable energy worldwide may have peaked and is trending down.

To be sure, there is the left-wing Californian government proposing that the state’s electricity generation should be carbon-free by 2045, although electricity still will be sourced from interstate generators using fossil fuels.

By contrast, the recent election of a conservative government in Ontario — Canada’s most populous province — and the wipe-out of the previous progressive Liberal government has meant a rapid reversal of fortune for renewable energy there. The Liberals had held power since 2003, implementing a radical green agenda. Coal-fired electricity plants were closed, albeit with significant delays, and incentives were put in place for investment in renewable energy projects, particularly wind farms.

Ontario joined a limited cap-and-trade scheme with California and several US eastern states, thereby imposing a form of carbon tax in Ontario. Interestingly, the emissions reduction targets set by the Liberal government still were not achieved, notwithstanding these interventions. The election of Progressive Conservative Premier Doug Ford has taken a big stick to most of these policies. The latest cap-and-trade auction has been cancelled and approvals for new wind farms have been withdrawn. The $C14,000 ($14,863) subsidy to the purchasers of electric vehicles has been cancelled.

At a federal level in Canada, the Trudeau government has run into difficulties with its plan to impose an escalating carbon tax. The original idea was that the tax would be levied in all provinces deemed to be acting inadequately to reduce emissions. Some provincial governments are threatening to sue the federal government. And the Trudeau government has needed to tweak its carbon tax plans to deal with the commercial threats to energy-intensive, trade-exposed firms operating in Canada. This situation has been made more difficult by the recently imposed tariffs on some Canadian exports by the US administration.

In Germany, the solar industry basically has collapsed in line with sharply reduced subsidies from the government. Subsidies to wind turbines have oper­ated since 2000 but are due to run out in 2020. Some older turbines will need to be decommissioned, raising several thorny issues, including the lack of provisioning for the costs by the operators. The blades are incapable of being recycled and the turbines are anchored to the ground using hundreds of tonnes of concrete, making the decommissioning process problem­atic. One estimate puts a potential loss of existing turbines in Germany at 5 per cent of the stock by 2022.

German Chancellor Angela Merkel is under pressure to extend the life of coal-fired power stations. And recently she rejected the proposal of several EU countries to lift the shared emissions reduction target by 2030 from 40 per cent to 45 per cent. This is notwithstanding her earlier support for the higher target.

China often is cited as an example of a country that has invested heavily in renewable energy. What is less often cited is China’s substantial investments in new coal-fired and nuclear power stations. Providing affordable and reliable electricity across the country while shutting down old coal-fired power stations with damaging particulate emissions has been the top priority in China for some time.

A major event occurred in June with the decision of the Chinese government to slash the subsidies paid to solar power operators. In the future, there will be no subsidies and the incentives for existing projects are being cut to 10c per kilowatt hour. As a result of this change, the price of solar stocks has fallen significantly. (We should note here the dominance of China in the production of solar panels. Of the 10 largest firms, seven are China-based and another is based in Hong Kong. There is a large supplier in Canada but the firm has Chinese links.)

So what does this mean for Australia? The renewable energy sector is keen to spruik its economic case. It notes that about 7200MW of capacity has been added in the past few years, although this is nameplate capacity rather than actual 24/7 generation capacity. It also notes that the cost of renewable energy is falling, more so for solar than wind.

The combination of the dying days of the renewable energy target and active subsidisation of renewable energy projects by state and territory governments, mainly through the reverse auction process, has driven this latest burst of investment in wind and solar farms. However, no new projects are proceeding in which operators are taking the merchant risk. (A possible exception could be Chinese-backed projects.) Without power purchasing agreements from users, no new projects are likely to proceed.