<<what does "once hosted hydrocarbons over a large gross interval" mean? Having read all that, how much, if any, oil is or is not there?>>
Mike: I'm not a geologist, but I'll attempt to explain the news release to the best of my understanding. First, however, you need to understand a bit about the geology of oil formation and collection.
In order for there to be a "commercial" deposit of oil, three geological conditions must be met. First, there must be a "source rock" in the subsurface of the area that generated the oil at some time in the geological past. Second, there must also be a separate, subsurface "reservoir rock" to hold the oil. Finally, there must be a "trap" on the reservoir rock to concentrate the oil into commercial quantities.
The source of oil is organic matter that is buried and preserved in ancient "sedimentary" rocks. These source rocks contain not only inorganic particles such as sands and muds, but also dead plant and animal material.
Crude oil (a type of "hydrocarbon" formed from the dead plant and animal material) is relatively light in density compared to water, which also occurs in the subsurface sedimentary rocks. Oil rises by buoyancy through fractures in the subsurface rocks after it has been generated. The rising oil can intersect a layer of reservoir rock, which is a sedimentary rock layer that contains billions of tiny spaces called "pores". (A common reservoir rock is sandstone composed of sand grains, just like the sand found on a beach.) "Grains" of the reservoir rock are like irregularly-shaped spheres which do not fit together precisely. The pores are the open areas between the touching grains. Oil flows into the pores of the reservoir rock layer.
Any fluid (including oil) will always flow along the path of least resistance, even underground. The path of least resistance in the subsurface is along a layer of reservoir rock because most of the pore spaces interconnect, allowing the fluid to flow from pore to pore up the angle of the rock layer toward the surface. The relative ease with which the fluid can flow through the reservoir rock is called "permeability", and the movement of the oil up the angle of the reservoir rock towards the surface is called "migration". Because of migration, oil can end up a considerable distance, both vertically and horizontally, from where it was formed.
As the oil migrates along the reservoir rock, it can encounter a "trap", which is a high point in the reservoir rock where the oil is stopped and concentrated. One type of trap is a natural arch in the reservoir rock called a "dome" or "anticline", with a "caprock" overlaying the reservoir rock which acts a seal and prevents fluid from escaping the trap. Without a caprock the oil would leak up to the surface of the ground. Two common sedimentary rocks that act as seals are shales and salt layers.
In a geological trap, fluids separate according to their density. Natural gas is the lightest fluid, so it goes to the top of the trap to form a "free-gas cap". Oil is heavier than natural gas, but lighter than water, so oil goes to the middle of the trap. Water, usually salt water, is the heaviest material, so it goes to the bottom of the trap.
Seismic equipment is used to detect hidden traps in the subsurface. Seismic uses a "source" and "detector" to image the subsurface sedimentary rock layers. The seismic source, located on or near the surface, gives off an impulse of sound energy into the subsurface. The sound energy bounces off sedimentary rock layers and returns to the surface to be recorded by the seismic detector. Sound energy is used to make a picture of the subsurface rock layers.
Despite the ever-increasing accuracy of modern seismic equipment (especially 3D), the only way to know for sure if a trap contains oil is to drill a well. A well drilled to find a new oil field is called a "rank wildcat" well, an exploratory well that is drilled at least two miles away from the nearest production (as opposed to a normal "wildcat" well, which is a controlled exploratory well drilled less than two miles away from nearby production). Due to the technical complexity of the exploration business, most wildcat wells eventually wind up being "dry holes", wells that do not singlehandedly discover a "commercial" quantity of oil. Rank wildcats typically have no greater than a 10-20% success rate, depending on the basin involved. "Commercial" means a large enough quantity that can be recovered economically (as opposed to "technical", which means non-commercial). Dry holes are usually plugged and abandoned by pumping cement down the wellbore.
Now on with the analysis...
IMO, the press release addressed two different bits of news: some bad, and some good. The bad news, at least in one respect, was that Umm Sagura 10d was a _typical_ rank wildcat -- a dry hole. Quite simply, it did not identify a commercial quantity of oil or gas. While disappointing, this result was not too surprising given the slim odds inherent in a rank wildcat.
The good news, on the other hand, was that the well identified a technical quantity of oil within both the Bentiu and the Zarqa formations of the Umm Sagura area.
With respect to Zarqa:
<<the well is important in establishing the presence of a significant Zarqa oil bearing zone in the Umm Sagura area>>
<<In the Zarqa zone, the company encountered 16 meters of net pay>> -- (i.e., there were 16 net meters of vertically thick zones within the formation that contained oil)
<<The lower sand was perforated and flowed dry oil to surface. The upper sand also tested dry oil, however, studies showed a poor cement bond and water broke through before definite flow rates could be established.>> -- (i.e., the physical amount of oil could not be quantified before water broke through during the flow test)
As for the the Bentiu formation:
<<Results of Bentiu testing were disappointing with the zone testing water, however, residual oil saturation indicated on side wall cores show that the Bentiu zone once hosted hydrocarbons over a large gross interval.>> -- (i.e., a significant amount of oil used to be there, judging by the net vertical thickness of the wellbore zone that contained residual oil saturation, but it has since migrated to another location, possibly still within the Bentiu formation and nearby the original Umm Sagura well, but not directly in contact with the wellbore)
IMO, this first well, while not commercially successful, technically confirmed the presence of two of the three geological conditions required for collection of commercial quantities of oil -- source rock and reservoir rock. The only missing element was an effective trap, which may have mechanically failed over time due to simple geological shifting of the earth's layers.
With this as background, now re-read the following statements:
<<The Umm Sagura area consists of a series of four regional exploration fairways bounded by major fault blocks. Because of the complex geology, many exploration wells will be required to evaluate the potential of the Umm Sagura area.>>
<<The drilling rig then moved five kilometers east, drilled and cased the Umm Sagura E 35c well to test a new exploration fairway.>>
In summary, the results were not conclusive (non-commercial dry hole, but technically confirming). Although Umm Sagura 10d confirmed that oil is present within the Umm Sagura area -- definitely in one formation and possibly two -- it simply did not allow quantification of any recoverable reserves. IMO, not very newsworthy.
Umm Sagura E 35c may be more successful. Oil is definitely there... Surprise, surprise!... Now all we need is an effective trap or two.
Although I am somewhat disappointed by the non-commercial results of the first Umm Sagura well, I see very positive signs from the technical results. I've been in the business long enough to understand that dry holes occur, in very large numbers, even amongst the most proficient exploration players. That's the nature of the business. Sometimes it may look like gambling to outsiders, but that's not really the case. The technical risk of this play doesn't worry me at all. Arakis is avoiding "gambler's ruin" the smart way, by drilling enough wells that a string of dry holes in a row won't kill them. As I've said before, the trick is to play the odds from the dealer's side of the table, and that's what Arakis is doing.
More importantly, however, Arakis is drilling in one of the largest proven undeveloped basins in the world. One day soon, odds are definitely in our favor that another one of Arakis' exploration wells in Sudan is going to hit solid pay. For that reason, I continue to hold my investment, and I continue to sleep well at night. <g> |
