In July 2005, Oilex entered into an agreement with the Cambay Field Joint Venture, comprising Gujarat State Petroleum Corporation Ltd (GSPC) and Niko Resources Ltd (Niko) to acquire a 30% participating interest in the Production Sharing Contract (PSC) covering the Cambay Field. Oilex acquired an additional 15% equity interest from Niko and now holds a 45% participating interest in the Cambay PSC.
Located in the prolific Cambay Basin, the Cambay Asset is the most significant component of the Company’s portfolio, covering 161 km² (~40,000 acres) in Gujarat State, the industrial heartland of India.
The geology in the Cambay Asset is proven to contain hydrocarbons and has a prospective section of 2,800m. 36 wells have penetrated the Eocene Formation, a tight silt stone section with 16 vertical wells testing oil and gas to surface. The contract area is covered by a high quality 3D seismic survey acquired by Oilex in 2007. Oilex is committed to implementing proven North American technology to achieve commercial production from the Eocene Formation.
CAMBAY IN DEPTH
The national oil company, ONGC drilled the first well in 1958 and there have been a significant number of subsequent wells targeting conventional reservoirs in the Cambay Basin.
A discovery of oil in Ankleshwar structure in 1960 provided a further boost to the exploration in the Cambay Basin and out of 244 prospects drilled, 97 are oil and gas bearing.
Oilex became one of the first foreign companies into the basin when it farmed into a PSC with Niko and GSPC in 2005 as an operator with a 45% interest.
Between 2006 and 2011, the Company conducted an extensive work programme in the contract area, including 3D seismic, five wells and a study to evaluate the application of shale gas technology to the Eocene reservoirs. Netherland Sewell & Associates, Inc. (NSAI), conducted an independent assessment in 2011 which identified significant Contingent Resources and Prospective Resources.
Cambay-73 was originally drilled in 2008 with a single stage fracture stimulation and was subsequently shut in. During an extended production test in 2012 it had a peak production rate of 1MMscfd and 23.5 bbls of condensate.
A gas-sales agreement has been entered into to sell Cambay-73 gas. In addition to the cash flow from the sale of gas and condensate, Cambay-73 will provide critical flow data to further assess the deliverability of the Eocene Reservoirs.
In 2011 the Company drilled Cambay-76H, the first horizontal multi-staged fractured stimulated well in India, representing an important milestone in the transferring of proven North American technologies. Down hole mechanical problems precluded a successful flow testing of this well, although oil and gas flowed to surface during well control operations. In 2014, Oilex successfully completed Cambay-77H, achieving significant progress in delivering all the proof of concept objectives:
- Efficient drilling operations demonstrating the repeatability of targeting the Y Zone
- Y Zone reservoir properties are laterally consistent, having variability within expectations
- Successful completion of 8 fracture treatments
- Successfully demonstrated “Plug and Perf” completion technique in India
- First horizontal well in the Cambay Basin with multiple fracture treatments to achieve flowback
- Flowback data used to calibrate horizontal well model for the first time
- Future well designs may have wider frac spacing, leading to significant cost savings
The key field results from Cambay-77H flowback and production testing are encouraging. The sustained initial 24 hour rate during flowback was 2.03MMscfe/d, comprising 55% light oil/condensate with concurrent operations water production of 1,867bbls/d. Flowing wellhead pressure was 1,261 psig. Rates are presented in energy equivalents converted at 5,800 scf of gas per bbl of oil because the well was originally designed as a gas and condensate producer.
With all the proof-of-concept objectives having been achieved, a significant milestone has been reached towards creating a profitable and sustainable business. It is also a first step for India, towards improving its domestic petroleum supply by using multiple fracture treatments in horizontal wells that have transformed the energy equation in North America. Oilex is proud of its first mover position, competitive advantage and achievement in initiating development of tight oil and gas using this technology in India.
The results clearly indicate recovery of significant volumes of oil and gas can readily be achieved. Importantly, Cambay-77H and the model, confirm that the tight Eocene formation in the Cambay Field is amenable to this form of fracture treatment, leading to the conclusion that the Y Zone can be commercially developed with this technology.
Oilex is particularly well placed to successfully deliver production, cash flow and reserves from the Cambay asset in the future.
Oilex is at an advanced stage in completing a detailed working plan to take the Cambay project forward and the results to date support a vertical well with the dual objective of developing the undepleted OS-II reservoir sand and also targeting recovery of core from the Eocene siltstone (EP-IV or Y Zone).
The vertical well will seek to obtain core samples from the EP-IV Zone reservoir for drilling and stimulation studies. This is essential prior to drilling a horizontal extension for potential later exploitation of the Eocene siltstones. The well will also have the potential to test the shallower, productive, OS-II conventional reservoir or may be later used to test the EP-IV based on results of the core. The detailed planning for this well is being finalised and is subject to Joint Venture approvals. This approach allows Oilex to take advantage of the lower cost vertical well drilling rates in India at present.
In April 2015, Oilex tabled the reserve and contingent resource volumes associated with the EP-III/IV (X and Y Zones) resulting from the review undertaken by third party certifier, RISC. Since that time, a number of key factors have changed including:
- a change in economic assumptions related to lower gas prices being realised because of the world wide fall in oil and gas prices;
- Oilex’s Joint Venture partner’s failure to approve ongoing work; and
- the resultant deferral in project timing which pushes the recovery of Reserves to beyond the current term of the PSC. Note that under the PSC extension policy dated 28 March 2016 announced by the GoI, on Oilex’s request the PSC can be extended for 10 years or the economic life of the block, whichever is earlier. Oilex shall be exercising its PSC extension right under the policy at an appropriate time.
On this basis, RISC has recommended in June 2016 that the Reserve volumes be re-classified to Contingent Resources. It should be noted that the total estimated volume of hydrocarbons has not been amended. The updated recoverable hydrocarbon volumes are tabulated below:
|Net Gas Volume
|Net Condensate Volume
|At April 2015||Reserves||Y Zone||0||93||170||0||3.6||7.8|
|At June 2016||0||0||0||0||0||0|
|At April 2015||Contingent
|X and Y Zones||215||324||558||12||23.8||46.8|
|At June 2016||215||417||728||12||27.4||54.6|
Table shows Oilex Net Working Interest (45%) Reserves and Contingent Resources
Reserves in Y Zone have been reclassified Contingent Resources
Refer to ASX announcement 24 June 2016 for further details