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HRT source rock a good find

27 June 2013 Author   Christine-Rita Abankwah

front oil 28 juneYou can liken Brazilian energy company HRT Participacoes em Petroleos’ (HRT) recent oil find to drilling for water on a farm, but finding it in the wrong spot, experts say. It is a good sign of existing water–you just need to find it in the spot where you want it.

Industry experts speaking at this week’s oil and gas seminar co-hosted by Namcor and the Ministry of Mines and Energy, emphasised the need for people to understand the geological aspects of HRT’s recent announcement.

One of the major highlights of the seminar, held in Windhoek, was the presentation on Geology and Geophysics made by James Cheeseman, senior geologist at London-based Tullow Oil. Cheeseman is currently working on the development of large onshore Ugandan oil reserves.

Cheeseman’s presentation provided grounding in petroleum geology and the building blocks of the oil industry; the definition, usage and accumulation into reservoirs were some of the areas he touched on.

“The fact that HRT were able to recover oil from the Wingat-1 well proves the existence of a source rock which has been subjected to the right pressure and temperature conditions to produce oil in an area historically believed to be gas prone.

“This is very encouraging since it has de-risked at least one criteria necessary for a fully working oil system offshore Namibia. We await the results of HRT`s next two planned wells with great interest to see whether they can discover a fully working oil system, together with commercial volumes of oil,” he said.

He stressed the importance of patience, when considering the oil find and the factors involved in finding a working oil system.

In geology, a source rock refers to a rock rich in organic matter, which if heated sufficiently, will generate oil or gas.

Asked if it was not perhaps too early to celebrate an oil find, director and CFO for HRT, Martin Davis said, “I don’t think anybody is celebrating it [the oil find]. One of the major finds was the fact that we have a source rock that’s producing oil, because people felt that Namibia was just there to produce gas.

“But we do have source rock which is operating what we call the ‘oil window’ which has actually produced oil– that’s a fact. So obviously, we couldn’t find commercial volumes but actually finding a reservoir is much easier than finding a source rock.

“So even if HRT never find the oil, the fact that we found the source rock means not just us, but all the companies operating offshore have a great chance of finding oil,” he said.

He explained that HRT started drilling on 1 June and had committed to doing up to four wells.

HRT has experienceda series of shake-ups this year, including the resignation of its CEO and other key staff, as well as a drop in its share price following its abandonment of both the Wingat-1 well and another that turned up dry in northern Brazil’s Solimoes Basin.

Earlier reports show that the company’s market value shrank after investors were discouraged by the find of gas instead of oil in the Amazon, also considering the fact that gas sells for less than crude oil, yet is more expensive to transport.

“I can’t speak for HRT but it doesn’t take a genius to know that what they have found in Brazil is mostly gas, and shareholders in any oil and gas company would be looking for the black gold, not gas- that is what the market demands,” Namcor’s Managing Director ObethKandjozesays.

He explains that people would understandably be furious because they want to see more return on their dollar– which is the difference between oil and gas.

“There are more returns on equity, when you find oil rather than when you find gas. Of course, the other additional issue is where do you want to put your money?

“A significant amount of money was raised on the back of both Namibia and Brazil, now for you to split that money and get the returns on your dollar, shareholders will have their preference; I’m not saying that’s what happened, I’m just imagining what the discussions were.

“So Namibia is among the competition for that small cake. So what transpired is a choice between shareholders,” he says.

The oil and gas seminar aimed to educate non-specialist staff in Namibia, who are interested in the oil industry, especially following HRT’s recent oil find.

Led by local and international industry experts, presentation topics ranged from Drilling and Completions and Logging and Petrophysics to Reservoir Engineering and Petroleum Economics. Clara Altobell, international asset manager for Serica Energy, said she felt the seminar had achieved what it meant to.

“The significance is that it’s the first time in Namibia that we have industry people from all around the world that have come here with several years’ experience to impart their knowledge.

“It was open to people who don’t necessarily study geology or engineering, to appreciate what is involved in the industry. It’s an opportunity for people who don’t usually meet to network and talk about the industry,” she said.

Davis said he believed that since the event targeted people who were not familiar with the oil industry, those who were not on the technical side enjoyed gaining an understanding of the business.

“It’s important because we hope that the oil industry is going to play a fundamental role in the development of the economy in Namibia, so the more people that understand the industry, the better,” he said.

Kandjoze added, “The fact that the industry saw it befitting to dig as deep into their pockets as they did to be here, just to engage the public means that they take this country as a serious destination for oil and gas exploration. That is the most important message in my opinion.”

The organisers hosted the seminar with the significant logistical assistance of Serica Energy Plc. There are no immediate plans to repeat the event next year.