Some Data on Gas, oil - reference material - “I want to be an oilman…”

The Chimaera gas seep, near Antalya or Antioch as it was known in Biblical times,
(SW Turkey), has continuously been active for millennia and it is known to be the
source of the first Olympic fire in the Hellenistic period.

Chimaera represents the biggest emission of abiogenic methane on land discovered

so far.

Deep and pressurized gas accumulations necessary to sustain the gas flow for mil-
lennia, likely charged by an active inorganic source, may be present.

The Chimaera gas seep, about 90 km south of Antalya, is near the town of Kemer.

Molecular and isotopic analyses shows methane (approximately 87%, light

alkanes, hydrogen (7.5–11%), carbon dioxide (0.01–0.07%, helium ~80 ppmv and
nitrogen (2–4.9%.

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The seep releases a mixture of organic thermogenic gas, related to mature type III
kerogen occurring in Palaeozoic and Mesozoic organic-rich sedimentary rocks, and
abiogenic gas.

Methane is not related to mantle or magma degassing. The abiogenic gas accounts
for about half of the total gas released, which is estimated to be well beyond 50 ton
year to the power of -1. Ophiolites and limestones are in contact along a tectonic
dislocation leading to gas mixing and migration to the Earth’s surface.

Chimaera represents the biggest emission of abiogenic methane on land discovered

so far. Deep and pressurized gas accumulations are necessary to sustain the
Chimaera gas flow for thousands of years and are likely to have been charged by
an active inorganic source.

Panhandle-Hugoton field (Anadarko Basin) in Texas-Oklahoma, USA is the most

important gas field with commercial helium content.

Reservoir conditions are found in Lloydminster on the Alberta-Saskatchewan

border, one of the largest Canadian oil reserves.

“Processes of Heavy Oil and Tar sand Origin, and Novel strategies for
Exploitation” (of these resources) is a new initiative within the Canadian
Department of Geology and Geophysics, that will involve geochemists, geologists,
hydrogeologists, geo-physicists, engineers and microbiologists.

Biodegraded oils dominate the world petroleum inventory, with the largest oil re-
serves being found, not in the Middle East, but as heavy oils and tar sands on the
flanks of foreland basins in the Americas with Canada having a very large share of
this vast resource.

Off the west coast of Africa, deepwater well-construction costs exceed $20 million
per well, and minimum required production levels to make wells economically
viable are now at 10,000 B/D [1590 m3/d].

Primary production is ordinarily the first stage of production. Secondary

production involves moving the oil out in some way from the reservoir.

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Generally moving oil out relies entirely on natural energy sources. To remove
petroleum from the pore space it occupies, the petroleum must be replaced by
another fluid, such as water, natural gas, or air.

Oil displacement is caused by the expansion of in situ fluids as pressure declines

during primary reservoir depletion.

The natural forces involved in the displacement of oil during primary production
are called reservoir drives. The most common reservoir drives for oil reservoirs are
water drive, solution or dissolved gas drive, and gas cap drive.

The most efficient drive mechanism is water drive. In this case, water displaces oil
as oil flows to production wells.

An effective reservoir management strategy for a water drive reservoir is to

balance oil withdrawal with the rate of water influx. Water drive recovery typically
ranges from 35% to 75% of the original oil in place (OOIP).

In a solution gas drive, gas dissolved in the oil phase at reservoir temperature and
pressure is liberated as pressure declines.

Some oil moves with the gas to the production wells as the gas expands and moves
to the lower pressure zones in the reservoir. Recovery by solution gas drive ranges
from 5% to 30% OOIP.

A gas cap is a large volume of gas at the top of a reservoir. When production wells
are completed in the oil zone below the gas cap, the drop in pressure associated
with pressure decline causes gas to move from the higher pressure gas cap down
toward the producing wells.

The gas movement drives oil to the wells, and eventually large volumes of gas will
be produced with the oil.

Gas cap drive recovery ranges from 20% to 40% OOIP, although recoveries as
high as 60% can occur in steeply dipping reservoirs with enough permeability to
allow oil to drain to downstructure production wells.

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Gravity drainage is the least common of the primary production mechanisms. In

this case oil flows downstructure to a producing well. This is the result of a
pressure gradient that favors downstructure oil flow to oil movement
upstructure due to gravity segregation. Gravity drainage can be effective when it
works. It is most likely to happen in shallow, highly permeable, steeply dipping
reservoirs.

The behavior of the field depends on which mechanism is most important at

various times during the life of the field. It is important to characterize the well
and the field. Reservoir Flow Models are used to simulate production at start. Test
wells are then drilled to compute and compare actual flow to the model.

In a very real sense, the reservoir model determines how much money will be
available to pay for wells, compressors, pipelines, platforms, processing facilities,
and any other items that are needed to implement the plan represented by the
model.

For this reason, the modeling team may be expected to generate flow predictions
using a combination of reservoir parameters that yield better recoveries than would
be expected if a less "optimistic" set of parameters had been used.

The sensitivity analysis is a useful process for determining the likelihood that a set
of parameters will be realized. Indeed, modern reserves classification systems are
designed to present reserves estimates in terms of their probability of occurrence.

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 Some Data on Gas, oil - reference material - “I want to be an oilman…”

Weird Science

Creation within the mantle

Russian researchers concluded that hydrocarbon mixes would be created within the
mantle. Experiments under high temperatures and pressures produced many
hydrocarbons, including n-alkanes through C10H22, from iron oxide, calcium
carbonate, and water. Because such materials are in the mantle and in subducted
crust, there is no requirement that all hydrocarbons be produced from primordial
deposits. Hydrogen is one element needed in a hydrocarbon. Carbon is the other.

Hydrogen generation within the earth

Hydrogen gas and water have been found more than 6 kilometers deep in the upper
crust, including in the Siljan Ring boreholes and the Kola Superdeep Borehole.
Data from the western United States suggests that aquifers from near the surface
may extend to depths of 10 to 20 km.

Hydrogen gas can be created by water reacting with silicates, quartz and feldspar,
in temperatures in the 25° to 270°C range. These minerals are common in crustal
rocks such as granite. Hydrogen may react with dissolved carbon compounds in
water to form methane and higher carbon compounds.

One reaction not involving silicates which can create hydrogen is:

Ferrous(iron) oxide + Water → Magnetite + hydrogen

The above reaction operates best at low pressures. At pressures greater than 5 GPa
almost no hydrogen is created.

Serpentinite mechanism
One proposed mechanism by which abiogenic petroleum is formed was first
proposed by the Ukrainian scientist, Prof. Emmanuil B. Chekaliuk in 1967. He
proposed that petroleum could be formed at high temperatures and pressures from
inorganic carbon in the form of carbon dioxide, hydrogen and/or methane.

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This mechanism is supported by several lines of evidence which are accepted by

modern scientific literature.

This involves synthesis of oil within the crust via catalysis by chemically reductive
rocks.

A proposed mechanism for the formation of inorganic hydrocarbons is via natural

analogs of the Fischer-Tropsch process known as the serpentinite mechanism or the
serpentinite process.

Serpentinites are ideal rocks to host this hydrocarbon creation process as they are
formed from peridotites and dunites, rocks which contain greater than 80% olivine
and usually a percentage of Fe-Ti spinel minerals.

Most olivines also contain high nickel concentrations (up to several percent) and
may also contain chromite or chromium as a contaminant in olivine, providing the
needed transition metals.

However, serpentinite synthesis and spinel cracking reactions require hydrothermal

alteration of pristine peridotite-dunite, which is a finite process intrinsically related
to metamorphism, and further, requires significant addition of water.

Serpentinite is unstable at mantle temperatures and is readily dehydrated to

granulite, amphibolite, talc-schist and even eclogite.

This suggests that methanogenesis in the presence of serpentinites is restricted in

space and time to mid-ocean ridges and upper levels of subduction zones.

However, water has been found as deep as 12 km, so water-based reactions are
dependent upon the local conditions.

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Oil being created by this process in intracratonic regions is limited by the materials
and temperature.

Serpentinite synthesis
A chemical basis for the abiotic petroleum process is the serpentinization of
peridotite, beginning with methanogenesis via hydrolysis of olivine into serpentine
in the presence of carbon dioxide.

Olivine, composed of Forsterite and Fayalite metamorphoses into serpentine,

magnetite and silica by the following reactions, with silica from fayalite
decomposition (reaction 1a) feeding into the forsterite reaction (1b).

Reaction 1a:
Fayalite + water → Magnetite + aqueous silica + Hydrogen

Trace metals
Nickel (Ni), vanadium (V), lead (Pb), arsenic (As), cadmium (Cd), mercury (Hg)
and others metals frequently occur in oils.

Some heavy crude oils, such as Venezuelan heavy crude have up to 45% vanadium
pentoxide content in their ash, high enough that it is a commercial source for
vanadium.

These metals are common in Earth's mantle, thus their compounds in oils are often
called as abiomarkers.

The abiogenic hypothesis of the formation of hydrocarbons within the earth argues
that the petroleum was formed from deep carbon deposits, perhaps dating to the
formation of the Earth.

The presence of methane on Saturn's moon Titan is cited as evidence supporting

the formation of hydrocarbons without biology.

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Most petroleum geologists however, prefer theories of oil formation, which holds
that oil originated in shallow seas as vast quantities of marine plankton or plant
materials died and sank into the mud. (No dinosaurs mentioned here).

Under the resulting anaerobic conditions, the resulting organic compounds

remained in reduced state. Under these conditions, anaerobic bacteria converted
the lipids (fats, oils and waxes) into a waxy substance called kerogen.
As the source rock was buried deeper, overburden pressure raised temperatures
into the oil window, between 80 and 180 °C.

Most of the organic compounds degraded into the straight-chain hydrocarbons that
comprise most of petroleum. This process is called generation kitchen.

Once crude oil formed, it became very fluid and migrated upward through the rock
strata. This process is called oil expulsion. Eventually it was either trapped in an oil
reservoir or oil escaped to the surface and was biodegraded by soil bacteria.

Oil buried deeper entered the "gas window" of more than 160 °C and was
converted into natural gas by thermal cracking. Thus, theory predicts that no oil
will be found below a certain depth, only unassociated gas. At greater depths, even
natural gas would be pyrolyzed (heat converted).

It is possible that both mechanisms (or more) exist.

Edirne License - Western Turkey, Thrace

Otto Energy, Turkey, holds a 35 per cent interest in the Edirne License
onshore Thrace Basin of north-western Turkey.

The Edirne license was originally acquired by Otto Energy in 2004 but is
now a non operated asset, operated by joint venture partners Petroleum
Exploration Mediterranean Int. (55%) and a local Turkish company Petraco
(10%). 

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Edirne License showing gas discoveries (red) and prospects (yellow)

To date, seven gas discoveries have been made on the licence for a total of
approximately 10-20 Bcf (gross) of discovered gas. Well testing was
successfully completed in June 2008 and testing has continued in June/July
2009.

Otto Energy and its joint venture partners have awarded two contracts for
the design and engineering of a gas processing plant and pipeline for the
development of the Edirne gas fields in Western Turkey.

Negotiations for Gas Sales Agreement is underway and then development

of the field with production expected to commence in Q1 2010. This low
cost exploration and development project is teamed with a good fiscal
regime and a robust domestic gas price. It will become Otto's second
producing asset and source of cash flow.

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 Some Data on Gas, oil - reference material - “I want to be an oilman…”

Wells in Turkey drilled by PolMak:

TBNGC
Yörükler-1
17.02.1987 - 28.03.1987
3940 ft
Dry
TBNGC
Hayrabolu-1
01.03.1988 – 08.04.1988
4252 ft
Gas
TBNGC
Tatarlı-1
02.05.1988 – 30.05.1988
4164 ft
Dry
TBNGC
Hayrabolu-2
20.06.1988 – 21.07.1988
5565 ft
Gas
TBNGC + JIN
Banarlı-1
17.08.1988 – 07.09.1988
5002 ft
Dry
TBNGC
Bayramşah-2
16.07.1989 – 28.08.1989
4115 ft
Gas
TBNGC + JIN
Banarlı-2
07.09.1989 – 24.10.1989
4877 ft
Dry

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TBNGC
Hayrabolu-3
15.11.1989 – 16.12.1989
4851 ft
Gas
JIN + PAŞ
Paşayiğit-1
15.02.1991 – 29.03.1991
6666 ft
Dry
PAŞ
Kandamış-3
31.07.1991 – 20.08.1991
3812 ft
Dry
ETI + EEL
Habiller-3
30.10.1993 – 02.04.1994
4602 ft
Dry
TBNGC
Hayrabolu-4
11.05.1994 – 30.06.1994
4300 ft
Gas
PAŞ
İ. R. Berent-1
14.02.1995 – 28.04.1995
4360 ft
Oil
TBNGC
Gelindere-1
27.07.1995 – 22.08.1995
4555 ft
Oil

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TBNGC
Hayrabolu-5
21.01.1996 – 23.02.1996
4538 ft
Gas
TBNGC
Gelindere-2
15.08.1996 – 12.09.1996
4780 ft
Gas
GE
North Iraq Oilfield
15.03.2003 - 15.07.2003
Re-entry
5750 ft
Oil
Operators:

TBNGC  : Thrace Basing Natural Gas Corporation

JIN  : JFP International

PAŞ : POLMAK Sondaj Sanayii A.Ş.

ETI : Exploration Trrenex Inc.

EEL : Eastward Energy Ltd.

G E : General Energy

MEGE : Menderes Geothermal Elektrik Üretim A.Ş.

POLMAK owns 7 rigs operating both locally and internationally of which four rigs are
for workover operations and the other three are for drilling operations.
RIG 1  : IDECO H-44C Rambler Rig capable to drill 2600 m. operating in Turkey.
RIG 2  : Skytop-Brewster RR400 drilling and well servicing unit available in Turkey.
RIG 3 : F320-3DH Rig capable to drill down to 6000 m. available in Turkey.

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Doing Business in Turkey - income taxes on individuals and businesses

http://www.businessinturkey.com/non-residents’-foreigners-taxation/tax/

Non-resident companies are those companies that have their statutory seat outside
Turkey and/or have an effective place of management outside Turkey. So-called
non-resident entities are those companies, which have their headquarters neither
legally, nor business wise in Turkey.

The non-resident entities are subject to Turkish corporation tax only on the part of
their income earned in Turkey, while others – Turkish Companies – are being taxed
on income earned in and outside of Turkey, i.e. their worldwide income.

Based on the Turkish Corporation Tax Law (K.V.K.) there are seven kinds of
income for non-resident entities. These types of income are explained below, and
maximum burdens of taxation as set forth in Turkish law and tax treaties, as
applicable.

10.2.1. Business profits

1.1. Taxability conditions
When a foreign company has a permanent establishment in Turkey or has a
representative the profits are generated through and by a permanent establishment
or representative is regarded as business profit of the foreign entity and subject to
Turkish tax. We refer to paragraph “I.1.1. (Individuals) Business Profits”.

1.2. Method of taxation

As explained in the first section in paragraph “I.1.2.”, annual income and expenses
will be recorded and books need to be kept, according to Turkish Procedure Law
and at the end of the accounting year an annual tax return needs to be submitted.
Tax is levied on net profit attributable to the place or activities where it was
generated.

Taxable profit comprises the taxable entity’s gains from all sources, derived by any
means and in any form.

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Exemptions are provided to encourage investments and stock exchange operations.

These exemptions reduce the applicable rate.

Profit and loss is calculated on an annual basis. In principle the taxation year is the
calendar year. Exceptions can be granted where the business so requires or the
parent company has a different accounting year.

Normally all expenses related to the business are deductible.

The corporation tax rate amounts to 30%.

When profits are distributed or transferred to abroad (Head Office) then 10%
withholding tax is applicable on the dividend.

What this basically means, when we receive FUNDS while we are in Turkey or
possibly negotiating a deal, i.e. “doing business”, we should be aware of these
issues. Entering the country on a pleasure visa, and doing business.. Caution..

10.1.5. Income from immovable property (rent)

5.1. Conditions for taxation

Earnings received by letting land, properties, buildings, fixed assets, equipment,
motor vehicles and royalty, know-how, patent, trade marks are called income from
immovable property and are subject to income tax if received by an individual.

When received by a non-resident individual, if:

- The property or the fixed asset is in Turkey or,
- The above mentioned intangibles are utilized in Turkey, and
- The rent payment is recorded into the books and accounts of a resident individual
or company as deductible expense, and then the income is taxable in Turkey.

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