Apart from large quantities of natural gas with world class delivery, there is oil at the bottom of InterOil’s resource Antelope. The odds of getting it out look very good….
We have sensed great enthusiasm around the company, confidence of getting that oil to flow. That enthusiasm has translated into shifting priorities. Apparently, it’s now top priority to finding it, and it’s the reason the company spend so much time evaluating the bottom of the Antelope1 well.
Don’t forget, a commercial oil find will change everything:
- near instant cash-flow, especially because InterOil at present already operates a refinery on the island (PNG, Papua New Guinea) for which they have to import crude.
- The much lower cost base of refining it’s own oil will open up export possibilities and will get the refinery to operate at full capacity (at present, it operates at less than 2/3 capacity), further significantly adding to the bottom line.
- The early monetization will turn resources into reserves and further underpin the already clean balance sheet
- It would up the value of the find very significantly.
- It would greatly reduce the need for InterOil to rely on third parties to finance the LNG facility.
- It would greatly increase the bargaining position vis-à-vis those third parties.
The company has shifted priorities for now of finding the right spot with high porosity and permeability which will allow the oil to flow in commercial quantities. Antelope1 is, in all likelihood, not the well for that, the porous rock doesn’t lie deep enough, where the oil is.
But, and this is the crucial ingredient, low porosity draws the water higher, so where porosity is higher, the water contact is lower (it’s actually a contact zone, or transition zone). This has been pointed out by the most respected poster on the boards.
He has just revised his position with regards to the possibilities at Antelope2. He first thought that the ‘reef’, the part with by far the highest porosity, wouldn’t be deep enough for the oil zone. He has apparently changed his mind. Here is the whole post:
- OK, I guess I will have to admit that I have been asleep at least since the presentation of November 11,2008. http://www.interoil.com/presentation/200… I try to see what they are showing us in these presentations but sometimes I miss something very important. Maybe others have noticed what I am about to show you but they have not pointed it out to us.
- First, you should disregard what I said in the last part of Part 3 above about the oil being in the low porosity limestone platform in Antelope 2. I have been misled by the numbers on the side of the seismic charts such as chart 15 in the above November 11,2008 presentation. Those numbers appear to be sub sea depths but that must not be the case or they are incorrect, so let’s quit looking at those numbers. Now that you have chart 15 in front of you, look at the cartoon at the bottom which I assume still depicts what they expect to see at Antelope 2.
- As you know Antelope 2 will be drilled on the South end of the reef or the right side of this chart. Now back on November 18th this chart showed that they had gas down to -7221 feet sub sea. It was not clear on the chart but both of the depths shown in meters and feet are sub sea measurements. Now look at the bottom red line as in moves to the right side of the reef and you will see they expect the -7221 feet to be in the reef. Now the good news. They have determined that the gas/oil contact in Antelope 1 is at 2368 meters which is -7114 feet sub sea or 107 feet higher than shown on the November 11 chart 15. Now let’s move along to the July 7th presentation at: http://www.interoil.com/presentation/Elk…
- As you know they have told us on chart 11 they think the gas/oil contact is at 2368 meters or 7769 feet measured depth which is -7114 feet sub sea. Further, they have told us on the same chart that the oil/water contact is at approximately 2486 meters or 8156 feet measured depth which is -7501 feet sub sea. I have been estimating the top of the oil/water transition zone to be at about 2450 meters which I believe is still about right.
- My thoughts had been that any test below that would produce water but now I believe the meaning is that the lower the porosity is the higher (thicker) the transition zone will be. They estimate the porosity in this lower zone to be 4% which is too low to be productive but the low porosity draws the water higher in the formation due to capillary pressure. Note on chart 8 they refer to “capillary height data” . What does this mean? Well I think they are saying if we have high porosity in other parts of the field such as Antelope 2, then the transition zone will not be so thick and the zones above the sub sea depth of -7501 feet will be oil productive. So they are saying they think we have 387 feet of oil column (7501-7114).
- Now let’s have a look at their new schematic shown on chart 28 (pictorial only: not to scale). Maybe it has no meaning since we don’t have depths shown and it is not to scale but just for fun let’s draw a horizontal line from the bottom of the lines used for well bores at Elk 4 and Antelope 1 across the page to where we will drill Antelope 2. As Julio would say, if we find 387 feet of oil in the reef porosity at Antelope 2 it is game over. Have a nice weekend.
We can’t wait the drilling to start..