New Frontiers of Exploration Activity

PLAY

Optimum Application of Geosciences in the Search for Hydrocarbon in Frontier Basins, Examples from Sudan

NOT AN OFFICIAL UNCTAD RECORD

11th African Oil & Gas Conference & Exhibition 23 - 25 May 2007 1

New Frontiers of Exploration Activity

Simplified Geological Map of Sudan

Muglad Basin
Tertiary & Older sequences Cretaceous & Older Sequences Basement Rocks Basin Boundary

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

New Frontiers of Exploration Activity

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

New Frontiers of Exploration Activity

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

New Frontiers of Exploration Activity

Opportunities
Why has there been so much interest in onshore Sudan? Success & profitability
High success rates (69%) Low Exploration Unit Finding Cost ($0.90/b)

Improved infrastructure
More than 300-kilometer long pipelines from Heglig, Palogue & Fula to Bashyer Marine Terminal in the Red Sea. Three refineries of 130,000 b/d capacity (to be expanded to 200k b/d)

Contractual arrangements
Cost recovery & profit sharing basis (PSC) Encouraging tax & custom exemption

Sudan is providing areas with exciting opportunities for 11 African Oil & Gas Conference & Exhibition exploration companies of all sizes. 23 - 25 May 2007
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New Frontiers of Exploration Activity

Developing local content

For the industry to be beneficial to the Sudanese people, the Government formulated policies to ensure localization of all petroleum projects ..
Engagement of small indigenous companies with smaller capital allows them to partake in oil profits and minimize capital flight Localization of projects that facilitated knowledge and technology transfer, which were & remain crucial for better harnessing of local workforce and resources Nationalization program is focusing on improving the technical capability and competence levels of the local workforce (80% of two major op. co. nationalized within 5 yrs.)
11th African Oil & Gas Conference & Exhibition

Developing people for 23 better resource management - 25 May 2007

New Frontiers of Exploration Activity

PETROLEUM RESOURCE ASSESSMENT IN FRONTIER BASINS DESPITE THE IMPRESSIVENESS OF FANCY ECONOMIC AND ENGINEERING ANALYSES, THE BIGGEST FACTOR IN THE POSSIBLE PAYOFF OF A PROSPECT OR A PLAY IS THE GEOLOGICAL, JUDGMENTAL ESTIMATION OF HYDROCARBON VOLUME AND RISK -- David A. White (1993)

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

New Frontiers of Exploration Activity

Risk and Volumetric

Explorationists are not concerned about whether hydrocarbons are present or not in the prospect, rather they want to know the chance of finding a sufficient quantities of petroleum to warrant completion of the drilled well. They also think of if a well is completed, how much profit will it generate?

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

New Frontiers of Exploration Activity

Why Do Risk Analysis?: To quantify the unknown (uncertainty) To forecast or predict events yet to come To compare alternative investments Before one goes into risk analysis, it is important to assess potential outcomes and their values. Prerequisites of Risk Analysis: Define investment opportunities (outcomes) Historical data or analogy Seek expert opinion Knowledge of principles of probability and statistics
11th African Oil & Gas Conference & Exhibition 23 - 25 May 2007 9

New Frontiers of Exploration Activity

EVALUATION PROCESS FLOW

Economic Assumptions
Price Cost Escalation Inflation Exchange Rate

Economic Results
Economic Indicators

DECISION

Assessment of Geol. Elements Source reservoir Trap/ Seal Timing

Engineering Facility cost, Production profile, Recover Factor

Economic Analysis (Cash flow Model & Value Matrix, NPV, EV; Fiscal terms, Tax) Risk & Sensitivity Analysis

Mean Resource Volume (=EV= Revenue)

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

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New Frontiers of Exploration Activity

HC Resource Assessment in Virgin Basins Look-alike Approach

Comparison has to be made on basis of examination of the key factors that are favorable for the generation and accumulation of commercial quantities of hydrocarbon . Three main factors have to be considered in searching for analogy:
1. Tectonic evolution, basin geometry & size, 2. Sedimentation style and, 3. The Geothermal history These factors have control on the presence and effectiveness of the petroleum geological elements are processes

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

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New Frontiers of Exploration Activity

Step-by-Step
Resource Assessment in Virgin Basins Look-alike Approach STEP #1: Look for, and choose a mature basin that is comparable or similar to the virgin basin under investigation, STEP #2: Generate a frequency, and thereafter a filed size distribution diagram from the discovered fields in the mature basin, STEP #3: Work out the mean reserves from the field size distribution of the analogous mature basin (Muglad Basin) STEP #4: Use the Prospect Size Distribution Table to find out the expected mean HC resource from virgin basin under investigation,
11th African Oil & Gas Conference & Exhibition 23 - 25 May 2007 12

New Frontiers of Exploration Activity

CENTRAL AFRICAN RIFT SYSTEM
KN1

BLOCK 2A
May-25 Bamboo

MUGLAD BASIN
EGYPT
BLOCK 1A
El Toor E
ELTOOR El Saqr(U7) El Harr(U8) Umm Saqura Kuoc (U14) Nor Jak UNITY FIELD

KN23 KN20 (Timsah-1) KN15

NH12

Sadeeq Jidian

Bamboo South
Tayib Laloba Rihan FIELD Hamra TOMAR El Nar (U6) TOMA SOUTH

Amal-1 Amal Updip(K25)

HEGLIG FIELD Kanga El Mahafir Barki

Jamousse

El Toor N

Shammam-1 (Drilling)

BLOCK 4
K5 Malok (K9)

El Ghazal

Munga Cent.

WU5
El Majak

TALIH

FIELD

Kaikang-2 Kaikang-1

Khairat E

Nyang

KS1b (Tamur-1)

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

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New Frontiers of Exploration Activity

BASIN TECTONICS & PETROLEUM SYSTEM Sagging Rifting
SRCTM

Tertiary System

Rift Cycles

Sagging

Rifting

Sagging Rifting
11th African Oil & Gas Conference & Exhibition 23 - 25 May 2007

Cretaceous System

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New Frontiers of Exploration Activity

Sedimentation Style

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

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New Frontiers of Exploration Activity

Example of field size distribution of discovered reserves Look-alike Approach
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Typical lognormal distribution

20

15

10

0 MG MGS KNE MGN UBS ETSE FH ETN KHN KHW ESS ETE PA PD KHE USS PJ UBN YAR

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

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New Frontiers of Exploration Activity

Muglad Basin Field Size Distribution

P1

P10
Mean = 54 MMBO

P50
P70 P80

P90

0.1

1000 10 100 Potential Reserves (MMBO)

23 - 25 May 2007

P99
17

11th African Oil & Gas Conference & Exhibition

New Frontiers of Exploration Activity

Mean HC Resource Assessment in Virgin Basins Look-alike Approach Example of estimating future field size of the virgin basin under consideration using the Muglad Baisn as ANALOG
Prospect size distribution for minimum = 1.0 X 10 Minimum 1 1 1 1 1 ML 3.16 3.87 4.47 5.00 5.48 Maximum 10.00 15.00 20.00 25.00 30.00 Mean 3.51 4.50 5.39 6.13 6.91 Minimum 1 1 1 1 1 ML 21.20 22.40 24.50 26.50 28.30 Maximum 450.00 500.00 600.00 700.00 800.00 Mean 43.40 46.90 52.40 60.60 65.40

The overall mean reserves from lognornmal distribution of the analog (Muglad Basin) is 5.4 X 10 million bbl, and our assessment minimum were 1.0 x 10, we could run down the Mean column of Table above until we hit the closest number to 5.4, which is 5.39. The selected distribution would be (1 - 4.47 20) X 10. Therefore the mean resource volume to be used for economic assessment & decision analysis would be 45 million bbl.
11th African Oil & Gas Conference & Exhibition 23 - 25 May 2007 18

New Frontiers of Exploration Activity

EVALUATION PROCESS FLOW IN OIL & GAS PROJECTS

Economic Assumptions
Price Cost Escalation Inflation Exchange Rate

Economic Results
Economic Indicators

DECISION

Assessment of Geol. Elements Source reservoir Trap/ Seal Timing

Engineering Facility cost, Production profile, Recover Factor

Economic Analysis (Cash flow Model & Value Matrix, NPV, EV; Fiscal terms, Tax) Risk & Sensitivity Analysis

45 MMBO

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

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New Frontiers of Exploration Activity

Muglad Basin Field Size Distribution

P1

P10

P50
P70 P80 Small Fields 0.1 1 Medium Fields Large Fields

P90

1000 10 100 Potential Reserves (MMBO)

23 - 25 May 2007

P99
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11th African Oil & Gas Conference & Exhibition

New Frontiers of Exploration Activity

No Commercial Discovery Small Field
POS

Medium Field Large Field

Decision node (= decision maker dictates) Chance node (= nature dictates)

11th African Oil & Gas Conference & Exhibition

23 - 25 May 2007

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New Frontiers of Exploration Activity

11th African Oil & Gas Conference & Exhibition 23 - 25 May 2007 22

New Frontiers of Exploration Activity

PLAY CONCEPT

PLAY

SOURCE Is there oil in the basin?

TIMING Trap formation vs. Generation?

Probability of Success

RESERVOIR Porous rock that can hold?

11th African Oil & Gas Conference & Exhibition

TRAP/ SEAL Is there a place to collect it?

23 - 25 May 2007 23