The previous experience on TGD was, well, quite an experience.
After all the excitement about the placing, I found myself slightly surprised by the 90% COS figure that sems to have been blurted out: the guys have given themselves a one-in-ten chance of not only looking a bit embarrassed, but also of having the share-price trashed to well below NAV for some time afterwards.
However, it's all been said and done and in the interim I have been amusing myself by considering the well design. (Yep, some of us do get our kicks that way - no pun intended.) Incidentally, the phrase "over-engineered" has been quoted a couple of times and I think it's been misplaced - it's the well that's going to be over-engineered, not the rig!
Background
TGD-1X
We know that in July 2007, pressures of 12,000 were reported when TGD-1X reached 4625m (along-hole depth, I don't believe we know what the True Vertical Depth was.) The well was suspended and in announcing plans for TGD-1X-ST1 in Oct 07 Soco said that they had assembled the proper high pressure drilling equipment which included a 15,000psi BOP.
TGD-1X encountered hydrocarbons in two Oligocene clastic sequences, which were separated by a volcanic layer. Well logs over the upper sequence showed about 30 metres of net pay and they were unble to log the lower section, though at the time they suggested that seismic interpretations show another 300m of sediments above the basement.
As far as I can work out, the section below the volcanics is overpressured; that is to say, instead of the pressure-depth graph being a nice straight line, there is not only a change in gradient just below the volcanics, but quite possibly a step out as well.
TGD-1X-ST1
Holy moley.
Here's a quote from Ed in Oct 2007:
"We are particularly excited to return to the TGD structure. Success in the
deeper objective section of this structure could totally transform this company
and represent a significant milestone in the history of oil exploration in
Vietnam. Accordingly, we are quite anxious to resume our evaluation now that we
have assembled the proper high pressure drilling equipment.
We were all pretty excited too. How did it go?
I'm sure you don't need much reminding. Here's one reaction from June 2008:
Certainly a lot should have been learned from this dismal experience to bring any future well back within more realistic timelines. SW10's Law is affected by a number of factors, but it seems to me that there has been a surprising amount of human error on this well, mostly arising from contractors as far as I can see. They must have been spitting blood at Soco Towers: the frustration must just be immense. I'm sure it would be an attractive - if unrealistic - option to change out the contractors and maybe even the rig.
Alright, it was me.
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All the SNAFUs aside, ST-1 had limited shows whilst drilling the Oligocene, due to the higher mud weights needed to keep the pressure regime in check. Nevertheless, logging showed that the well encountered approximately 120 metres of good oil and gas shows in a combined gross interval of 570 metres. Permeability and porosity were preserved and Soco said they compared favourably with pre-drill estimates. In other words, they saw what they expected to see on the logs.
However, the rodeo ride to get this well drilled meant that it's integrity was poor and so the planned extension into the basement was abandoned.
Two drill stem tests ("DSTs") were planned in the high pressure/high temperature Oligocene interval. The first DST was over an approximate gross interval of 210 metres in the higher pressured zone below the volcanics layer separating the two over-pressured sections. The second DST was in the upper Oligocene interval above the volcanics layer over an approximate gross interval of 120 metres.
DST1: It's painful just to think about it. As Soco had it; downhole damage sustained during drilling and preparations for completion precluded recording meaningful sustained flow rates. After some Q&A, one poster noted that:
There does now seem to be the suggestion that the failure to get sustained flow was less to do with well damage per se (remember I suggested that perhaps solids were being produced) and more to do with a heavy fluid downhole preventing the well from coming in. A kind of equilibrium between the well and the fluid may have resulted in the well 'surging' back-and-forth without actually getting flow. Rather like that unpleasant feeling when you really want to burp but can't quite make it...
The shocker is that the heavy fluid, which would originally have been left to provide some protection against a blowout, may have reacted chemically with the production fluids put into the well prior to testing. This resulted in something heavier and/or more viscous and thus held the well back. Now, this is all supposition based on half-facts from a guy sitting several thousand miles away from the well and could be wrong, but if it's close to the truth then (yet another) sub-contractor needs his bottom kicked.
Yep, me again. However, the main point here is that the test flowed gas and condensate to surface.
At the same AGM in June 08 where those Q's were A'd, Soco described TGD as something that appears to be a very significant asset for the Group.
That wasn't all, though. DST2 was hampered by limited of the perforations, which had to penetrate two casing strings and associated cementing. Again, the problems encountered during both the drilling and testing of the well affected its ability to flow and there were no meaningful sustainable flow rates.
Designing for the future
Soco now have a lot more data to work with - not just in terms of the well itself, but also where to site it. The re-processing of the seismic will have used data from the previous TGD holes as calibration and that, alomng with some refinements in the model, should mean that they can aim at a part of the structure that seems likely to give some sound results.
Sitting thousands of miles of way with about 0.001% of the data available, I imagine that the real challenge for drilling is not the pressure per se, more the likelihood that there is a severe change in pressure gradient below the volcanics. Constant pressure gradients mean that a conventional mud column can be designed to hold back pressure from the well without causing too much invasion of the pore space. As soon as there is a change in gradient, then the mud has to be weighted up to deal with the higher pressures, meaning that the (always consistent) pressure gradient of the mud column causes invasion higher up in the hole, damaging the well.
I would guess that this means that they will deal with the well in two bites, the first down to the volcanics layer, where the well will be logged - and generously I hope - formation testers, fluid sampling, the whole works. They will then run casing to seal off the upper zone (without cocking-up the cement job) before drilling ahead in the lower zone before running another equally-generous wireline programme.
Once that's done, they can move on to the excitement of testing and finally give us some proper answers about this blessed structure...
I'd quite like to be there for the last few days of drilling and logging; if everyone can get their act together I really do believe that this is going to be a company-maker...
SW10
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SOCO International plc is an international oil and gas exploration and production company. The Company has oil and gas interests in Vietnam, which includes Block 9-2 and Block 16-1; Republic of Congo (Brazzaville), which includes Marine XI Block and Marine XIV Block, the Democratic Republic of Congo (Kinshasa), consists of Nganzi block and Block V and Angola, which include Cabinda Onshore North Block. The Company's operations are located in South East Asia and Africa. It holds its interests in the Republic of Congo (Brazzaville), through its 85%-owned subsidiary, SOCO Exploration and Production Congo SA (SOCO EPC). It holds its interests in the Democratic Republic of Congo (Kinshasa) through its 85%-owned subsidiary SOCO Exploration and Production DRC Sprl. Te Giac Trang (TGT) field’s Phase I production began on August 22, 2011. Total production net to its working interest from continuing operations, during the year ended December 31, 2011, were 5,437 barrels of oil equivalent per day. more »
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Interesting to note that the neighbouring block 16-2 has had two gas/condensate discoveries, the latest being reported last week. Very sketchy details but upper Oligocene is mentioned. What intrigues me, IIRC, is that this ex-Conoco block was marketed as being prospective for oil in the Miocene. This is a PSC licence operated by PetroVietnam. Since PV will be at the helm driving explo, I wonder if they’ve changed their objectives in what they’re searching for on the block. You can understand discovering gas/condensate whilst searching for oil once but hitting gas/condensate twice seems pretty unlikely unless it was targeted. Are they probing for Su Tu Trang lookalikes and similar based on 16-1 data?
PV could be feeling quite warm on Oligocene prospects south of TGT running into 16-1. Point being, they were most likely equally enthusiastic over TGD, hence their apparent support for licence extension.
Thinking on about the Ministry of Trade and Industry’s non-supportive stance, that was hardly surprising given what had gone before alongside their brief to promote new business, which isn’t quite the same as PV or the Ministry of Oil. PV has to produce both oil gas and more importantly profits, which for TGD under a new PSC wouldn’t necessarily be so attractive to them. Similarly, the Ministry of Oil has the same sort of objectives as PV. Long and short of it is that several layers of bureaucracy need to be negotiated through before the PM makes his decision. At the end of the day, two things matter. First and foremost, are Soco’s relationships with those who matter in Vietnam as good as they were with the earlier regimes? Secondly and crucially, do they know what the key is to unlock the TGD prize?
The jury is out. I’m not holding out much hope personally but as I always say, life is full of surprises!!
http://www.energy-pedia.com/article.aspx?articleid=143593
http://www.allbusiness.com/government/government-bodies-offices-government/14835768-1.html
http://www.hd.jx-group.co.jp/english/newsrelease/2010/pdf/20110105_01_01.pdf
In reply to davjo, post #423
All good points, as usual. :-)
It is difficult rationally to "hold out much hope" for TGD in isolation. However, in the wider scheme of things, TGD is just another element in a fairly complex negotiating map and I'd expect a resolution of some sort as part of a broader deal. These things are rarely as straightforward as they appear from the outside.
ee
Not sure whether anybody has viewed this - it was posted yesterday. I just wondered what exactly they had without TGD so browsed the website
http://www.socointernational.co.uk/index.php?cID=95&cType=document
Summary:
Substantial upside remains
Significant amount of near term news flow
Stock down 3% today in response!
In reply to Gopher, post #425
Yes thanks for that. It was mentioned over here in post 297 and there has been a limited amount of useful discussion about it.
Stock move today more likely to the Jefferies note out this morning, which seems to think nothing is going on (in contrast to the comments re upside and newsflow above). No surprise really - the analyst was equally negative when he was at MacQuarie, I believe, and I'd guess this was a "dusting off" of a previous note.
Re the upside/newsflow claims, we'll have to wait and see (though, if one ignores the obvious, it is very easy to see how Warn reached his conclusion).
ee
A couple of points of interest relating to TGD from PetroVietnam’s presentation in London last summer, albeit could prove academic :-
http://www.slideshare.net/thepipeline/dr-phung-dinh-thuc
Projects 2010 to 2015
Slide 13 - Exploration tests for stratigraphic traps in Cuu Long Basin
Slide 14 - Exploration priorities - appears to encompass the business end of 16-1 in the Cuu Long circle (note colour codes refer to licence type I think eg JOC vs PSC - looks like PVN have the 9-2 relinquished acreage)
http://www.investegate.co.uk/Article.aspx?id=201105050700099688F
The Company has been informed by the Hoang Long Joint Operating Company, the Operator of Block 16-1 in the Cuu Long Basin offshore Vietnam, that PetroVietnam has relayed the Government of Vietnam's agreement to the extension period for the Te Giac Den Appraisal area. The extension period is for 15 months (from 1st January 2011 to 30th April 2012) or 21 months (from 1st January 2011 to 31st October 2012) in the event that the Company elects to drill a well.
Several 3D seismic acquisition options are currently being reviewed and it is anticipated that acquisition of the 150 square kilometre 3D programme will commence in late June to early July 2011.
PetroVietnam has also informed the Company that the Government of Vietnam has approved the Full Development Plan for the Te Giac Trang Field, incorporating the second phase development. Installation activities in the field are ongoing and the H4 jacket for second phase drilling and production has been installed. The project remains on target for Phase I production start in August 2011.
WOOOHOOOOOOOOOOOOOOOO!
The Company has been informed by the Hoang Long Joint Operating Company, the Operator of Block 16-1 in the Cuu Long Basin offshore Vietnam, that PetroVietnam has relayed the Government of Vietnam's agreement to the extension period for the Te Giac Den Appraisal area. The extension period is for 15 months (from 1st January 2011 to 30th April 2012) or 21 months (from 1st January 2011 to 31st October 2012) in the event that the Company elects to drill a well.
http://www.investegate.co.uk/Article.aspx?id=201105050700099688F
Isaac, does the WOOOHOOOOOOOOOOOOOOOO! represent a cry of pain?
RG
Is your stockopedia picture suppose to show that your bald? It's just that you are not bald......I know because we have met.
Isaac, it's far better for someone to keep their mouth closed and have people think they are uneducated, than to open it and remove all doubt.
Buffy
well this is surely good news yet the price hasn't moved yet, I wonder how all this fits in with different theories discussed here. I appears to be an extension so I assume that means it's the same company, and that costs will be recoverable against TGT production ? I'm also guessing it makes a vietnam deal less likely in the short term, which I guess explains the lack or reaction in the share price this morning ?
K
btw hat tipped to ee, one of the few who always thought this was likely, good call, I had my doubts,
what are you thoughts on how this effects the possibility of a vietnam based deal going forward ?
it's starting to look like 2012 might be another chance at 2010, with more drilling in Africa, and another shot
at TGD, hopefully with a better result this time,
As I write , I'm thinking guessing that soco has kept the same share of tgd, perhaps one option for a deal is to sell SOCO vietnamn to someone and at the same time have son of soco farm in perhaps on a carried basis to TGD ? allowing a deal to go through, and retain some upside in the outcome of TGD ?
K
I know that double negatives are usually incorrect, but on this occasion I have to state categorically that:
1) I am not bald (not even receding a little bit). I used to be told I looked like Gerry Adams, but I've subsequently shaved my beard and more recently have started to turn a distinguished shade of silvery grey.
2) I have never met Isaac nor anyone who could remotely be mistaken for him.
In reply to tournesol, post #435
Maybe Isaac has met Gerry Adams
In reply to tournesol, post #435
Tournesol,
1. Good call by you on TGD licence as well.
2. Did you look more or less like Gerry Adams than Alan Booth of Encore does?
3. Did Isaac meet:
a) Alan Booth
b)Gerry Adams
c)You, but CONCEALED HIS OWN IDENTITY!!!!
4."but I've subsequently shaved my beard and more recently have started to turn a distinguished shade of silvery grey". I assume you mean your hair, otherwise please post a current (colour) photo.
w
In reply to kenobi, post #434
I don't think there is any chance to the probability. There is one other material matter to be settled (re gas prices and reserves) and then it could be game on.
This is a theory I have advanced previously on these boards and, unless there is a whole company deal (which I still think possible), I'd expect the VN deal to contain this sort of feature. 60% of TGD is a tradeable commodity, given the OOIP size, at least if they still think that it may be moveable with wells in the right place and the right technology.
ee
ok thanks ee,
thats probably where the thought came from then,
I thought you had been suggesting a farm in if the licence had been in a new co, and the rest could be sold, I was assuming this result would block that, which is what made me think perhaps the licence goes to the buyer, but a farm in is done to new co,
only a subbtle difference I guess,
cheers K
In reply to kenobi, post #439
I'd suggested both versions as possible at different times, mainly to indicate that the economic value of TGD wouldn't have to be left for any buyer unless the price was right. It was a very different story when PTTEP still had a seat at the TGD table though, because there would have been fewer structuring options to play with.
All speculation though - the only thing that matters is what gets delivered and when.
ee
'The Te Giac Den licence extension has been granted by the Government of Vietnam; seismic acquisition will commence later this month'
does anyone know if this has started, and how long it will take?
thanks
In reply to anteos, post #441
No I don't know if it has started but you can assume it will take several weeks to do....and then several months to analyse! Don't expect any conclusions before year-end.
ee