Opinion

Fractured resources, fractured hopes!

Posted by David Bamford

16-Jul-2017

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Earlier this year I was preparing a Finding Petroleum event on the Middle East (it eventually happened on May 16th) with Kurdistan a strong theme, some context being provided by Gulf Keystone Petroleum's financial restructuring, Genel Energy's  reserves downgrading, and lesser incidents with other Kurdistan exploration-oriented players.

Somewhere in that thought process, I realised that I had better check what I had said about exploration opportunities in Kurdistan at a similar event back in November 2009: I concluded “Doesn't this mean that shareholders in the Majors and bigger Independents are the ones that are going to be pleased, in the end; those in AIM-sized companies are going to be intensely disappointed?”

Phew!

So a little while ago my colleague Karl Jeffreys summarised one aspect of our May 16th event thus:

“The back story is that lots of investors have lost money in oil companies operating in Kurdistan, because their fractured carbonate reservoirs turned out not to contain as much oil as was previously thought.
 
The reason, we discussed in the conference, is that the reservoirs are made of fractured carbonates, which are hellishly difficult - perhaps impossible - to put in a computer modelling and reservoir simulation system. The carbonates contain a rock matrix, and fractures within the rock. Different types of rock behave differently, depending on whether most of the oil is being stored within the matrix or the fractures, and how it is able to flow. The shape of the fractures depends on many different aspects of geological history. Consequently oil and water flow in unpredictable ways. A lot of this is impossible to know until you actually start producing.
 
So any prediction of the reserves in a carbonate reservoir is not worth very much. 

By the way, carbonate reservoirs are estimated to account for 52% of the world's proven oil reserves and 60% of the world's oil production.
 
But companies have successfully managed to produce carbonate reservoirs. An example is the people who ran the Iraq Petroleum Corporation, which had a monopoly on Iraq E+P between 1925 and 1961. In the words of conference chairman David Bamford, their approach was "don't make promises, develop these things progressively, and learn about the field as you go."

Perhaps you would like to read more on the presentations that he has summarised, not only on Kurdistan but on wider Exploration in the Middle East, opportunities offshore Iran, and the regional political issues.

You can do this in our Event Review – click here – which summarises the presentations on fractured reservoirs and other insights on the Middle East.


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