Interesting reading: Second Best Source Rock In The World In North Falkland Basin
Transcript Of The Public Meeting On Hydrocarbons Held On Wednesday, 06 October 1999 Part 1
Recorded and Transcribed By J. Brock (Falkland Islands News Network)
Dr. Phil Richards (DPR) of the British Geological Survey brought along some
very encouraging news about what source rocks lay in the North Falkland Basin.
Estimates range from less than a million barrels to nearly 15 billion barrels of oil
hidden within the source rocks and in the sandstone structures of the basin. The
first part of the meeting comprised of a presentation by Dr. Richards with charts
and slides.
Introduction by the Chief Executive Mr. Andrew Gurr:
This is an exposition and a question and answer time and we have with us in the
Town Hall Tonight a venerable panel. We have the two (Phyl and Phil)s Dr. Phil
Richards sitting on my left and Mrs. Phyl Rendell sitting on my right. Those of you
who know Dr. Richards will know that he is from British Geological Survey and
he has been our (FIG?s) consultant on oil matters for seven years now and he is
one of the world?s leading experts on Falkland Islands oil matters and, of course,
Phylis Rendell as our Director of Mineral Resources and also, we have with us
the Chairman of the Mineral Resources Committee, Councillor Birmingham. They
are ready to answer questions.
It is a year ago from now, we were getting towards the end of the exploratory
drilling. We drilled about six wells and the rig has long gone from our waters. The
support services have left town. We have, of course, a mass of data. And, that
data, for the last year, has been being analysed both by the companies that
acquired it and by the British Geological Survey, our own consultants. Many
other companies, those who maybe didn?t drill here, have also been spoken to at
exhibitions, particularly by the three members of our panel tonight.
So, where are we now? What happens next? Is there any oil out there? Will
drilling ever start again? What about the Special Area of Co-operation with
Argentina? What about the world price of oil and the fluctuations there? What
about Desire Shares, once so high, now relatively low? Do we need a Mineral
Resources Department at all? (A question many people have asked.) Is it true
that all those who drilled have actually given up and we won?t see them again? Is
it true that five of the six wells actually had oil in them? Is our legislation up to
date? Can our infrastructure cope with another round? What is all this about
?open door policy?? And, is the Attorney General overworked? Well (no pun
intended) we hope to answer some of those questions and hope that that
stimulates questions here in the hall tonight. But, I will begin by handing over to
Dr. Phil Richards who is going to tell us where we are up to in some detail. He
does have an overhead projector which is going to help him but he?s so lucid in
his explanations and so colourful that I am sure those of you listening on the radio
will be able to understand absolutely everything he says and visualise what is on
the screen.
Presentation by Dr. Phil Richards:
I?m certainly not going to attempt to answer all of those questions during the talk.
However, I am sure they will pop up again at the end of the presentation. Perhaps
I can spend 15 minutes or so just having a look at these overhead slides and tell
people where we think we are now in terms of oil exploration. As Andrew quite
rightly says, those of you listening in black and white at home, will not be able to
see these slides but I will try to explain them as I go along. This might be a bit of a
pain for those of you sitting here looking at them but please bare with me.
The first slide is just a map of the offshore areas around the Islands showing
where it?s possible that exploration companies might wish to explore for oil. The
black is the Islands in the middle here and the green areas on the map are those
geological basins, the sedimentary basins, the holes in the Earth?s crust where
hydrocarbons may or may not be found at some point in the future. The reason
I?ve put this up is to highlight really the fact that there is a huge amount of these
basin areas around the Islands and to date the only exploration that has taken
place is in one very small part of the basin to the North of the Islands, the North
Falkland Basin. We have had a huge burst of activity there over the last three
years. In fact the first three years of the initial term of the production licenses, but
it?s been confined to a very small area.
Before we go any further, and just to bring those of you up to speed with the
terminology, in case you are wondering what I mean at this stage, by the term
basin, I?d just like to show you a cartoon of the Earth?s crust and the
development of the great East African Rift Valley, which is a basin not unlike the
North Falkland Basin. If you could imagine the earth?s crust being pulled apart
and as it?s pulled apart it stretches and the bit in the middle sinks. It becomes
thinner and sinks under the Earth?s mantle. Imagine a Mars Bar if you like. You
take both ends of a Mars Bar and pull. What happens is it stretches in the middle
and becomes thinner and gooey and the middle gooey bit sags. That?s exactly
what happens to the Earth?s crust. It sags and then the hole gets filled in with
material that gets eroded from the mountain sides. And it eventually fills up the rift
valley, which will be what happens to the East African Rift Valley over the next
10 or 20 Million years.
That?s exactly what happened in the North Falkland Basin, North of the Islands.
It started to stretch and sag just like a Mars Bar. It was in-filled by lots of
sediment that came off the surrounding mountains and, hopefully, this sediment
trapped some oil that was generated in the basin.
This nest very messy diagram is just a geological cross-section of the North
Falkland Basin from the West to the East, showing the geometry of this rift. And
showing you that it is very similar to the last pictures that I showed you of the
Great East African Rift Valley. What we have to notice particularly is that there?s
a very thick section of sedimentary rock that occurs within this basin and the six
wells that were drilled last year tested this sedimentary section in various places
looking for the elements of a petroleum system and looking for oil.
In geological terms, what they found was extremely interesting. They found that
the North Falkland Basin, if you could have seen it at the time that the rocks were
being deposited as soft sediment, was a great big lake system, surrounded by
mountains, surrounded by volcanoes that were spewing noxious gasses and
smoke out into the environment. These mountains and volcanoes were being
eroded by the action of wind and rain. The material was being washed down into
the lake in big rivers. And, deltas were building out into the lake. And, all the mud
was being washed way, way out into the centre of the lake basin.
Now, that mud is very important to us in the search for petroleum because it
holds the key to whether or not the North Falkland Basin will actually ever
generate any oil. The reason for stressing the fact that the mud is very important is
that, returning to the term that I used a few minutes ago, a petroleum system, I?d
like to just emphasise what a petroleum system is and why finding mud in this lake
basin is so important. There are many factors that you need to be able to find oil
in a basin. The first, and certainly the most important, is that you need what we
call a source rock, which is a very organic rich rock..a mud rock where all the
organic material clings/binds to the mud particles that get carried out into the sea
or into the lake. Without this organic rich rock, it?s not possible to find oil in the
basin because the oil is generated by the breakdown of the organic material As
the rock gets buried, as the clay gets buried, it is subjected to heat and pressure.
The temperature increases and the organic material breaks down and expels oil.
That?s the most important fact about a basin, is that it has to have a source rock.
And, people won?t come and explore in a basin if they don?t think that there is a
source rock present. That?s apparently why a lot of oil companies, when they
were given the opportunity to take licences here four or five years ago refused the
opportunity to come into the area because they thought, from their geological
analysis of the basin, that there wasn?t a source rock capable of generating oil.
There are many other things that have to work for petroleum systems to work
and for oil to be found. The oil has to be able to escape from this source rock
and to migrate through the other rocks into a porous rock, into a rock like
sandstone where the oil can sit between the sand grains in effect, like a giant
sponge. The oil doesn?t sit in cavities or caves underground. It sits between the
grains of the rock. That sandstone has to be bent into traps that will actually stop
the hydrocarbons migrating out of the sand grain pours and they have to be
trapped beneath some impermeable layer. Some kind of rock that won?t allow
the hydrocarbons to migrate any further. All those factors have to be in place
before there?s oil in the basin. If one of them doesn?t work, then the basin doesn?t
work as a petroleum system.
What we know from the drilling that has occurred so far, is that all these factors
are indeed in place in the North Falkland Basin. The six wells that were drilled
last year were drilled on some fairly large buried mountains within the North
Falkland Basin. These mountains are buried some 2 to 2.5 KM beneath the
seabed. So, people drilling in 400 or 500 metres of water and then they drilled, in
one case to 4.5 km into the seabed in order to explore for these buried mountains
that hydrocarbons might be trapped in. They drilled in the locations that you see
on this slide. The wells were clumped together fairly close in the Northern-most
part of the basin, all within 3 or 4 miles of each other and then a further well was
drilled about by IPC about 40 or 50 miles to the South. That?s still quite a long
way North of the Islands. And, all six wells are in this very small area and weren?t
particularly spread about.
I?ve got a diagram here of those wells. You certainly don?t have to bother about
the details of this diagram but, what it shows is some of the electric logs that were
obtained by the oil companies who put instruments down the holes and pulled
them up and measured many of the physical characteristics of the rock. They
measured, for example, the natural radio activity of the rock, the density of the
rock, the amount of resistance that the rock has to the electrical charge that was
imparted to it, how fast sound waves travel through the rock, and all of these
things are expressed as, if you like, wiggley lines that show the differences in the
responses. And, we can correlate these wiggly lines from one well to another and
correlate the geology as we know it in one well, to the geology as we see it in
another well. What we have been able to do from this correlation exercise is to
see whether or not there?s viable and extensive source rock in the basin. Which,
as I said when we were discussing the petroleum system is the one thing that we
need to find to ensure that there is the potential for generating oil in the basin and
to ensure that the search for oil continues.
Now, if we hadn?t found this source rock with the first six wells, it?s extremely
likely that everybody would have packed up their bags, gone away and that
would have been the last we would have seen of exploration in the North
Falkland Basin.
Quite the opposite is actually true. On the other side, (of the slide) you can see in
the blue colour here, the distribution of this source rock, the rock that has
expelled the oil as we currently understand it, within the six wells. We have done
an extensive amount of work on that source rock, not just at BGS but all the oil
companies have done it to a greater or lesser degree. Some of them have spent
many thousands of pounds doing detailed geochemical analysis back in their
laboratories.
What we have been able to determine from these analyses is that the source rock
is incredibly rich. It?s probably the second best source rock known anywhere in
the world. I can?t over emphasise the importance of this. It?s such a good source
rock that it?s capable of generating so much oil, that there will undoubtedly be
increased enthusiasm for exploring in this basin in the future.
The stories that came out in some of the UK newspapers and some of the
low-brow technical press during the drilling campaign suggested that the
exploration results were fairly poor and disappointing. That?s not the case at all.
Of course it would have been nice to have huge discoveries in the first half a
dozen wells but we never thought that it was a probability. You need to drill more
than half a dozen wells in a basin this size. You need to spread them about in a lot
more places than the first six we drilled in order to find oil.
What we do know is that the source rock has only partly been buried deep
enough to generate huge amounts of oil. I told you earlier when we discussed the
petroleum system that you need great depth of burial and a lot of heat and
pressure to convert the organic material to oil. The top part of the source rock
hasn?t been buried sufficiently deep to do that. But the bottom part of the source
rock has. The reason that we know this is not just because of the geochemical
results, that we?ve got from the laboratory analysis but by the fact that we?ve also
recovered live oil at surface in one of the wells.
Five of the six wells had hydrocarbon shows but one of those wells actually
flowed oil to surface. We have actually got some samples from one of the Shell
Wells.
I am not going to bore you with details of the geochemistry but it?s a very
technical business, but the best source rock in the world comes from a basin
called the Yunga Basin in Southern China. It has an organic carbon content within
that source rock of about 4.1%. Whereas the North Falkland Basin has an
organic carbon content of , on average, of about 4.5%. The Yunga Basin source
rock is capable of generating oil at the rate of 26 kilogram?s of oil per ton of
rock. The North Falkland Basin, on average, can generate about 42 Kilograms of
oil per ton of rock. And, in it?s best case can generate nearly 100 Kilograms of
oil for every ton of rock. That?s potentially an awful lot of oil that can be
generated in the basin.
Knowing the possibilities for oil expulsion and knowing over what sort of area the
source rock covers, we can make some sort of guesses as to how much oil has
actually been generated within the North Falkland Basin from this source rock.
That?s quite an important calculation to make. It allows people then to work out
whether or not sufficient oil has been generated to make further exploration
attempts worthwhile.
Now, the figures are very big numbers and they are very difficult to imagine. So,
let me put it into some sort of context for you. To make an oilfield viable in the
waters around the Falklands, you would need to find an oilfield of about 200
Million barrels. By the most conservative calculation that we do we know that the
source rock has generated one Billion barrels of oil. The best potential that I can
model for the Basin is that the source rock has possibly generated up to 11 Billion
barrels of oil. That?s an awful lot of 200 Million barrel oilfields.
One of the oil companies has done their calculations, however, and suggested that
less than a million barrels of oil has been generated, whereas another has done the
calculations and suggested that over 100 Billion barrels of oil has been generated.
So, you can see that there is a huge element of controversy here as to how much
oil has been generated in the Basin.
But, sufficient interest has been generated by these figures amongst the companies
presently there, for them to think the area warrants further exploration. And, we
know, in fact, from the discussions that we have been having with other
companies, (a company not presently represented in the area) that they also find
this incredibly encouraging and may well re-double their efforts to investigate the
Basin and to come in and to take new licenses or farm into existing licences to
provide extra finance for more wells to be drilled.
The obvious question to ask next is well, if there is so much oil, why have we only
had a little bit of it found so far? The reason for that is very simple. It may sound
fairly glib but, the wells were really drilled in the wrong places. That?s certainly
nothing unusual in terms of exploration in a frontier basin such as this. For
example, 17 wells were drilled in the central North Sea before any oil was found.
Over 190 wells have been drilled West of Shetland and only 2 or 3 fields have
been found so far. So, I think with only 6 wells drilled so far, in the North
Falkland Basin, we have still an awful lot to play for, an awful lot more to target
and different types of targets to be addressed.
One important factor about the six wells that were drilled last year was they all
tested the same type of exploration concept. They all tested the same type of
target. That wasn?t by design it was by virtue of the fact that many of the
production companies didn?t talk to each other. They have since begun to talk to
each other and we have encouraged them to talk to each other and encouraged
them to put as much information as they can into the public domain and
particularly to give the information to companies that haven?t been active in the
Falklands to date.
So, to summarise, we knew that we were never going to find oil in the first half a
dozen wells unless we were extremely lucky. We have proved that there is a very
good source rock in there, that there is a good reservoir, a good sponge capable
of soaking up all the oil and we?ve got plenty of oil and certainly a lot of gas. We
found a lot from existing wells. We know that there are also plenty of places left
to explore.
This ends part 1 of the transcript. Dr. Richards next tells us about where we go
next.
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