Calculating reserves are a little more complex than that I am afraid.
I have seen 60m columns yield less than 5bcf…and more than 2tcf…it all comes down to closure as a product of deliverability.
We are faced with two key issues here.
1. The well itself will have a bcf capacity…that is, regardless of what the field size is, each well will only effectively recover a certain amount of gas economically before typically water cut, or influx of the GWC renders the well uncommercial.
My guess is KN-1 will achieve something between 20-50bcf for the single well, the field size itself of course will be much bigger.
2. The second issue of course is the actual size of the accumulation.
It appears Kiliwani North-1 was drilled slightly off crest, between two high points in the accumulation, which apparently sit some 30-40m higher. From this we can deduct the thickest apart of the gas column will be some 35-40m thicker than that reported (ie 90-100m total), whilst obviously thinning down towards the outer edges.
The following seismic comes from BUY’s recent presentation whilst the section is from KEY…
As you can see, the KEY section clearly interprets the closure with the lower GWC continuing all the way to the Songo Songo 6 well location...effectively taking the Kiliwani discovery all the way to the boundary and across the dividing fault that sits slightly to the left of the KN-1 well site. (see below)
I have split the potential accumulations into two parts, the first 3.32m m2 and the second 4.85m m2 due to the fact the area to the left of the fault may yet have the same GWC as Songo Songo…this I assume will be the focus of future appraisal drilling?
Assuming the same GWC continues across the accumulation (and the fault) as per the KEY cross-section image, then the following can be deducted for closure…
To determine the closure, I have simply taken the announced intersection from the KN-1 drill (60m gas column) and simply gone down 60m via the contours on the seismic at this location, which appear to be in 20m increments.
Alternatively, if the fault just to the left of KN-1 acts to seal the accumulation, then we may well have a water contact to the left of here similar to Songo Songo, which would be some 35m higher.
This will have the following impact on likely closure…
Again, subsequent appraisal drilling will sort this.
Regardless of the eventual result, these closures are significant, suggesting an eventual field size in the 200-400bcf range…significant by anyone’s standards. With 40mmcf/d stabilized flow from KN-1 and likely production from this one well above this, there is absolutely no doubt in my mind we have a major discovery here for a company the size of KEY.
The most significant aspect of course is the upgrading nature this lower GWC has for the entire lease east of the Songo Songo field, due to the obvious sealing nature of the fault at this location…previously unconsidered trap may well now become viable?
What has become clear is that the first drill, (Kiliwani 1), appears to have drilled into a rather ambiguous, potentially complex trap location…this of course was complicated even further by the fact the well was drilled at an incline from the nearby Island, further impacting the margins for error.
Experience at Songo Songo, which in spite of its size, is none the less complex due to the numerous faults running through the area…evidenced by the fact they have hit several dead holes over there.
Perhaps our first drill was simply one of those?
Anyway…here is the moving overlay to help understand how I have laid it all out.
I am very much looking forwrd to he eventual field size analysis...and of course, indication of production/sales timelines.
KEY really is one of the good ones...with much more going for it than anzania, but frankly, it is not a bad fall-back to have, especially in the current energy environment against a backdrop wider market nervousness.
Need quality assets behind quality management..and we have that here.
Cheers!
KEY Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)