Petroceltic international (PCI) is an oil and gas explorer whose primary focus is on North Africa, namely Tunisia and Algeria. Petroceltic also has appraisal and exploration interests in Italy and offshore Ireland. As of the last interim results PCI had some US$20m in the bank and after the recent placing a further US$40m has been made available, giving them adequate cash for the foreseeable future. PCI have reserves as a result of their 75% wi in Algeria and the discovery on the Italian block B.R. 268, both of these will need to be proved up by further drilling as none of these reserves are currently in production. These targets are estimated to be the first discovery wells on much bigger prospects and that gives PCI some lower risk appraisal drilling with the opportunity to prove up significant reserves. PCI also have a production royalty from the Kinsale gas field offshore Ireland and is bringing in about US$900,000 per year as a result of strong gas prices.
Petroceltic has a 100% working interest in the 7, 500 square kilometre Ksar Hadada Block in southern Tunisia, which contains a number of leads and prospects. Back in November 2004 PCI were appraising the Sidi Toui prospect in Tunisia?s Ksar Hadada block, the target was some 400mmbbls of oil. The well was to be drilled 1300m and would take about 4 weeks to complete. The well encountered 177m of gross pay in the main target reservoir and 65m gross in a shallower reservoir, but no net and as a result the well didn?t give recoverable hydrocarbons. The large gross show did indicate that the area was active for hydrocarbons that may have migrated through this prospect at one stage. The well was suspended as the shallow 65m zone (secondary reservoir) wasn?t tested as the rig had to be released. Hydrocarbons migrate from high pressure reservoirs to low pressure reservoirs through porous rocks or incomplete top seals. Therefore, hydrocarbons tend to migrate from deep strata into the lower pressure higher reservoirs as long as an effective hydrocarbon trap is absent. It is possible that the hydrocarbons in this well made it to the shallower reservoir before they encountered an effective top seal. PCI would regard this well as unfinished business.
Also in 2004 the Onyx prospect on the Ksar Hadada block was at the early exploration stage where seismic was being acquired to identify future drilling locations. The Oryx prospect area is approximately 25 kilometres south of the Sidi Toui structure.
In Algeria PCI have a 100% wi in the Isarene Permit Area consisting of blocks 228 and 229 which were awarded in the 5th Algerian Bidding Round; subsequently a production sharing agreement was signed with the Algiers state oil company Sonatrach for the blocks. The Isarene Permit Area covers more than 10,800 square kilometres in area. Previous exploration of the licence over the last 50 years has included the acquisition of over 8,000 kms of 2D seismic and the drilling of sixteen exploration wells. Of these there were a total of nine oil and gas discoveries. Sonatrach estimate that these discoveries could contain more than 4 trillion cubic feet of gas and over 400 million barrels of oil. The two adjacent blocks to PCI?s licences were awarded to BP in the 6th Algerian bidding round, showing the high prospectivity for hydrocarbons in the area. In March 2006 PCI awarded the Algerian drilling tender to world leaders Schlumberger (SLB). SLB will drill 2 wells for PCI and this could form part of a multi-well drilling programme in the area over the next three or four years. SLB are world leaders in drilling and will have all of the latest technology at their finger tips. If there is oil in PCI?s Algerian property then SLB are one of the best in the world at getting it out. Drilling is expected to commence towards the middle of August 2006.
In January 2005 PCI acquired a 16.25% interest in Frontier Exploration Licence 1/05 over the Blocks 13/7 and part-Blocks 13/11 (NE) and 13/12 (N) ('the Blocks') located on the Atlantic Margin approximately 60 kms in board from the recent Dooish discovery offshore North West Ireland. The Blocks are situated over a petroleum system that is predicted to be similar to the successful Corrib and Morecambe Bay Gas Field areas. The primary reservoir target is the Triassic Sherwood Sandstone, which is anticipated to be present in a number of anticlinal structures within the Licence area. The largest of these, named Inishbeg is a robust, dip closed, ready to drill anticline that has the potential for commercially exploitable gas reserves of similar volumes to those now being developed in the Corrib gas field offshore NW Ireland. The shell operated Corrib field is estimated to be about 70% of the size of the Kinsale field, in other words some 1tcf of recoverable gas with start up flow rates of 60mmcfd, condensate production is estimated to be less than 0.5bbls/mmcf gas.
Another Irish independent oil and gas company has also taken up residency in the region, Island oil and gas (IOG). Both of these relatively small players are joining the likes of ExxonMobil and Shell in their hunt for large anticlincal structures with elephant-sized reserves. Mr T. O?Reilly of Providence told Proactive that PVR hope that the Atlantic margin offshore Ireland could become the start of the European energy network. The relatively under-explored region has attracted much more attention of late and there could be significant drilling activity in the region for 2007 and beyond.
With the North Sea maturing and the UK becoming as net gas importer, gas finds in the Atlantic margin and Celtic sea could be very important in the not so distant future. In October 2005 PCI announced the signing of the Petrolia semi-submersible rig by the operator and now joint venture (jv) partner Island Oil and Gas for a three well drilling programme, which commenced in April 2006.
In May 2005 PCI was awarded the Italian offshore licence B.R. 268 VG (formerly named BR.G.490) in the Adriatic Sea. The Licence covers 127 Sq. kms in shallow water immediately adjacent to two onshore oil discoveries named Miglianico-1 and 2. The application for B.R. 268 VG was filed before the Miglianico discoveries were made. The licence area contains an existing oil discovery named ELSA 1, which was drilled in the early 1990s. A previous licence holder (Enterprise Oil plc) estimated that this discovery could yield probable (P50) oil reserves in excess of 108 million barrels (mmbbls). Consequent to this discovery, Agip, the Italian oil major, drilled the nearby successful onshore Miglianico-1 and 2 wells which are now producing oil from the same oil reservoir that was encountered in ELSA 1. Miglianico-1 is only 800 metres to the South West of the B.R. 268 VG Licence boundary. The estimated reserves for the licence are quite impressive, a report from Petrel Robertson of Calgary suggested a P50 (mean) for the area of 182mmbbls of recoverable oil, and a P10 (highest) estimate of 567mmbbls of recoverable oil. PCI have 40% working interest (wi) with an pre-emptive option to increase above 40% wi should the Italian partner look to reduce their interest. The drilling campaign is planned for 2006, PCI will pay 60% of the drilling costs of the first well and 40% of costs thereafter.
PCI have a very busy year of operations ahead, from drilling activities in the short-term offshore Ireland, Algeria and Italy. Some of these targets are relatively low risk appraisals of structurally closed discoveries, although appraisal drilling is by no means risk free. The upside from successfully appraising some of these discoveries in Italy and Algeria could be significant. PCI also have potential elephant-sized exploration targets in the Atlantic margin, the area is relatively under explored and attracting majors (Shell and Statoil), but frontier exploration is considered as high risk. PCI have the cash on hand that will see it through these drilling activities and possibly through to oil/gas production. They have matured their exploration licences with seismic and its now time to see if it will pay off for PCI and its investors.