English summary 2017-09-30T22:20:53+00:00

The text in English is an unofficial translation of the Swedish original wording. If there are differences between the English translation and the Swedish original, the Swedish text will take precedence.

The Company’s acquisition of Mezhlisa resulted in control over the combined exploration and productions license 71-1 “Ellej-Igajskoje” in Tomsk Oblast, Russia.

Tomsk Oblast

Tomsk Oblast

The licence is a combined prospecting and production licence, TOM01559NR, which runs until September 2035.

In brief, the licence terms stipulate that the licensee shall:

  • Prepare a work programme, which can be revised while it is being performed
  • Perform re-entry of one of the two older wells on the licence block
  • Reinterpret seismic data and design a prospecting and work programme
  • Perform a prospecting programme within five years

If a commercial discovery of hydrocarbon is made and the licensee ascertains reserves, the following will apply for the licensee:

  • An appraisal programme must be developed and agreed on within 12 months
  • A seismic 2D or 3D programme must be commenced or a new well drilled within 24 months
  • At least two wells must have been drilled within four years, of which at least one must have been drilled in the third year
  • A reserve report must be drawn up and approved within six months of discovery

In addition to these terms, there are terms for environmental protection, reporting to authorities and industrial safety etc.

The licence area is 34 km2, and has been designed to cover the only known structure on the licence area.

block-71-7

Nickel Mountain Resources AB:s believes that hydrocarbons primarily can be found at three different depths, in the layers from the Jurassic period and in the weathered zone in the layer between the Jurassic and Devonian layers, as well as down in the Devonian layers, between depths 3,000 and 4,500 metres deep. The Devonian layers have traditionally not been prospected to a great extent in Russia, and it was not until recently that interest in them has increased significantly. Previously, the rich assets in the Jurassic layers or younger formations were more than enough to meet needs and have been better adapted to existing established technology. The structure is deemed a reef-like structure with a very large amplitude between the top and the bottom. The licence block is located in a part of the Western Siberian Basin which comprises a sub-division, the Nuyrola Basin, which has 13 or so similar properties with established hydrocarbon deposits in the Devonian layers.

Tomsk region

The Tomsk region is known for its oil and gas assets. Oil extraction in the region began in the 1960s and gas production was introduced in the mid-1990s. The Tomsk region is currently one of the ten leading oil regions in Russia.

The region is divided up diagonally in the middle of the Ob River, which runs from the southeast to the northwest and then out to the Arctic Ocean. The locals say the “left” and “right” riverbank, and infrastructure has thus far only been developed on the “left” side. Future growth in extractable hydrocarbons is primarily linked to the development of the right riverbank. The local government in Tomsk therefore thinks that the region will be key for the expansion of oil extraction throughout eastern Russia.

Background

In the Soviet period (1977 and 1991), two prospecting wells were drilled at licence block 71-1 down to more than 4,000 m deep. In the same period, several other wells were drilled nearby, but they are now on other licence blocks. The two wells in question were strategic prospecting wells, which are designed to explore the local geology, and not primarily to find oil and gas, and all the less to produce hydrocarbons. There was rudimentary seismic data at that time, but without breaking depths deeper than 3,000 m, which generally corresponds to the end of the types of rock from the Jurassic period. The older layers of rocks from the Palaeozoic period (Devonian, limestone), which are estimated to have the greatest prospectivity at this licence area, starts in this area around 3,000 m deep and continues down to just over 4,500 m. The licence area covers a part of the structure in the Jurassic layers, while the remaining part is interpreted from the seismic data going in to the adjacent licence, which is currently owned by Imperial Energy (owned by the Indian state oil company ONGC).

According to current seismic interpretations, both of the wells are estimated to have been drilled in what today seems to be the edge of the structure in question, and thus approximately 4 km from the “centre” of the structure. Once again, please note that there was not any seismic information on the depth at the time of the drilling – the parametric wells were drilled for precisely this purpose, among others – to get information from the depth.

The drilling of Well P-2 commenced in November 1977, but was not completed until September 1979, nearly two years later. The total depth is 4,569 m. Drilling was performed in different sections, upon which each section was logged, and then casing was put in place. Certain core samples were also taken, but with poor quality due to the fissured nature of the limestone. The well experienced an uncontrolled discharge of hydrocarbons due to poor quality of the cementation of the casing in one section of the well. According to the Soviet logs, tests of the hydrocarbons found a mixture of oil, gas condensate and gas.

Well P-4 was drilled in the final stage of the existence of the Soviet Union in January 1991 with deficient financing. P-4 is located 400 m southeast of P-2. The well was designed to be drilled in its first phase to the end of the Jurassic layers, to 2,977 m. After the hole was covered with casing and cemented up to the first target depth, the cement plug at the bottom of the well was to be drilled out before drilling work was to continue down into the Palaeozoic layers. However, a mistake was made during this cement removal, whereby the well was drilled a few metres too deep, down to the beginning of the Palaeozoic layers. Eyewitness point out that the well began to discharge hydrocarbons uncontrollably for days, and was difficult to seal down. This is not found in the log, since it was a mistake that could bring about negative consequences for the people responsible at the drilling site. The only official written indication of this known of it at this time is a telegram (attached below), which was sent on 29 April 1991 from the drilling site to the competent authority where the responsible plastic geologist requests a change to the work programme, since the current programme was not deemed to be “safe”, which was granted.

dokument-sid38The telegram text describes in brief that the responsible site geologist requests permission to adjust the agreed work programme by skipping certain loggings in the interval consisting of the upper Palaeozoic types of rock where a gas formation had been encountered. The reason he gave was that a risk situation with potential dangerous consequences could otherwise occur. The response telegram informs the responsible geologist that the sender approves the proposal.

The interval in question was heavily cemented after this and therefore could not be used for controlled flow measurement.

After this incident, the drilling continued and eventually reached the target depth of just over 4,000 m. According to the Soviet logs, a number of intervals were then tested from the bottom and up. These tests never reached the interval described above at the top of the Palaeozoic layers. No more flows were recorded at this depth according to the log as well. BNG’s own geologists suspect today that none at all, or only a few, actual tests were conducted at this depth, because the financing was very deficient at that time when the Soviet Union collapsed. In short, this hypothesis means that the responsible geologists and drilling crew simply logged test results that had not been conducted to avoid problems with incomplete work afterwards. This is however just a hypothesis that will be tested after re-entry into this well is completed. Then we will find out with the help of modern loggings whether the production tests (perforations) were actually conducted in these intervals in the beginning of the 1990s.

Reinterpretation of seismic data – Geoprime

A reinterpretation of the seismic data encompassing both older profiles from the Soviet period and modern ones collected between 2007 and 2009 by major oil company Sibneft for a large area was ordered in 2012/2013. The order went to renowned Russian company Geoprime (partially owned by major international companies Schlumberger and Integra). Geoprime identified three very interesting formations in the deeper Devonian layers. This data was correlated with information from the logs of the two existing wells. The result is that Geoprime sees four potential hydrocarbon-saturated intervals. Geoprime estimates in a mineral resource estimate according to Russian standard that the licence block in total contains the equivalent of 130 million barrels of oil equivalent in category C3, which means that they are potentially extractable and with an assumption that the hydrocarbons are primarily gas and the rest is oil and gas condensate. This is by no means a reserve assessment. It is an estimate of potential mineral assets/resources.

The estimated hydrocarbon-bearing zones altogether have a total thickness of approximately 148 m. The interpretations confirmed the Company’s own estimates and geological models and correlates with previously collected historical data. As far the Company knows, these seismic maps are the first ones that, with modern tools, systematically cover the deeper Devonian layers in this part of the Tomsk region and possibly the entire Tomsk region. They are based on 600 line kilometres of seismic data, divided into 13 profiles.

seismikbilf-sid-39

Explanation of image: The licence area is marked off as a red triangle. Blue lines are 2D seismic data from 2008, the black line is profiles from the 1980s. Black circles, “P-X”, are drilled wells, with their depth listed at the bottom of Jurassic. The red circle is a recommended spot for drilling the first new well, P-6. Grey lines are isocurves pertaining to reflecting horizons, in metres. The thicker grey line is the forecast reservoir distribution. The purple line with a line pattern refers to the three large Devonian/Palaeozoic horizons.

IOGT Analysis

Innovative Oil and Gas Technologies, IOGT, is a Russian specialist company that has developed new innovative solutions and technologies for asses oil and gas reseervoirs. IOGT is partially owned by Gazprombank and has a vast experience from well exploration for companies within the Gazprom sphere and other Russian and international exploration companies. The team within IOGT, including 15 doctors of science, has developed a unique approach to determine the fluid content in a well and the oil, gas and water saturation factors.

On July 15, the IOGT team started to gather information from well 4 on 71-1 “Elley-Igayskoye”. IOGT used magnetic impulse device, which can detect defects in the casing, and the team could by doing this evaluate the state of the well casing from wellhead to the bottom. Through a set of spectrometric methods, IOGT evaluated the reservoir’s properties and determined the current oil, water and gas saturation levels. The completed spectrometric analysis confirmed the high efficiency of this method for determining the nature of saturation in a reservoir.

The analysis confirm the previous conclusions of large reserves of oil and gas on the license block from independent competent person’s reports and the historical data from the original works during soviet times. IOGT’s analysis as example also confirms the existence of large quantities of oil and gas at a depth of 3813-3829.7 meters, average saturation level 62%. It was at this depth, 3810 meters, where the Soviets also encountered hydrocarbons in the second well, which resulted in uncontrollable blow outs of hydrocarbons in 1977.

IOGT Final Report 4 71-1

Operations

During 2014, the Company has initiated the exploration program in the Tomsk region, license 71-1 Elley-Igayskoye. The license is held in the local project company OOO Bakcharneftegaz in which the Company has the right to attain a 74 percent ownership against investing in total USD 12.4 million. The exploration program covers the re-entry of one old well, Phase 1, and the drilling of a new exploration well, Phase 2. The purpose of the exploration program is to prove as much reserves as possible and then exit the project to a larger company, more suited for the development phase. The initial phase in proving the contents of the asset was to attain a registration of resources under Russian C3 standard. An application was handed in during the period for attaining registration of resources in total corresponding to 134 mmboe in the Devonian layers. The application was approved as per 1.1.2015 according to the following:

  • Gas 16 470 million m3
  • Condensate 2 831 000/1 775 000 metric tonnes geological/extractable resources

This corresponds to 131.9 mmboe geological resources or 123.2 mmboe extractable resources (conversion rate used: 1 thousand m3 gas = 6.60; 1 metric tonne condensate = 8.18).

During 2014, Phase 1 was initiated and largely completed as regards perforation and testing. The well was re-entered in April, and drilling down to target depth was commenced. The drilling became delayed, due to the presence of obstacles in the well in the form of metal objects besides the expected concrete. This made the drilling down to target depth more time consuming and costly than expected.

After the cessation of drilling at a depth of 4 006 meters, certain well analyses were completed by the Company’s own team as well as third-party consultants, including the company “Innovative Oil and Gas Technologies”, IOGT. These analyses indicated a much higher than expected potential in the number of potentially hydrocarbon-baring intervals and potential thickness of the column. As a result of this, the exploration plan was expanded and covered more than 20 intervals, as compared to the originally expected 8.

The first perforations were made in the beginning of August 2014, and during the period, the Company perforated and tested 18 intervals, all of which showed the presence of hydrocarbon as well as not encountering any formation water.

In October a spontaneous gas flow of a commercial character was encountered, and test indicated that it emanated from the weathered crust on the top of the Palaeozoic layer. After the end of the period, significant flows of natural gas and gas condensates were proven from this interval.

On 13 February 2015, the Company encountered commercial flow rates of natural gas and gas condensates from the weathered zone, between 3 010 – 2 990 meters. Short term tests showed flows of 114 000 m3/day mix of natural gas and gas condensate as well as 5 metric tons/Day of pure condensate. The well flows strongly and the team works with controlling the significant flows in combination with rests of old concrete and other materials brought up from the well. During the nearest time, controlled tests of the well’s capacity to build pressure will be performed.