Firstly I would never invest in offshore Tunisian oil and gas. I believe it has many shortcomings and you can look back over the last 2 years at some of my reports there outlining these shortcomings. The reference to ADX was to outline to plugged, that what a Guru says or does not say, is not of relevance to a major. I can tell you my prospect has 100% chance of success, do you think some major is going to take what I say as correct or will they perform their own due diligence. Hence why the credentials mean nothing, its down to what the majors interpret and analyse. That's what I was highlighting.
Secondly, I was under the assumption the buried hill was in fact a buried hill play. These are Jurassic basement reservoir plays. FAR have a Shelf Edge closure combined with Turbidite Fan complexes, which are common cretaceous plays offshore West Africa and deeper GoM. The whole reference to buried hills through me off.
My comments regarding Shell and the "bait" were merely to question what you said previously, plugged:
"If the Senegal data was weak why would he pursue the $22 mill re-imbursement & only give a 70% working interest. It just doesnt stack up. I'll stick my neck out & give him more credit than this."
How are we to know whether the 3D is weak or strong? Our faith is in our managements ability to know they have drill ready prospects, which would entice third parties. At this point in time all we know is that data was not good enough for Shell. A further CSEM survey combined with the 3D was not enough to de-risk the fan complexes to a risk level they required. The $3.4 million was a required payment and the $6 million was necessary to de-risk the fan plays. Losing $9.4 million sure is better than losing $50 million on a dry well.
People keep raising Shells strategy. Let me ask you all do you know what Shells strategy is?
Unlike most oil majors who are in the business of reserve replacement and certification. Shell are in the business of developing long life, expensive projects. The majority of Shells projects are coming online between 2010 and 2011 and the costs are already sunk, thus making it one of the best if not the best positioned major to have massive exploration campaign through 2012 and beyond. Rigzone has published multiple articles on these developments and Shell. Many question Shells new strategy to go against the grain. Between 2004 and 2008 Shell spent 3% of net cash from operations, while other company's spent upwards of 10%. Many people foresaw BP overtaking Shell with its rapidly developing reserve base. Unfortunately for them they didn't understand the Shell philosophy of developing the biggest most expensive projects in the world to gain the advantage in the future.
Shell have a range of new projects coming online between 2010-2012. Pearl GTL is an engineering marvel. $20 billion worth of facility, 100% owned by Shell being supplied gas from the North Field/South Pars in Qatar, producing 320,000 bbl/d. Qatargas4, Perdido, Athbasca just to name a few of the billion dollar developments Shell have coming online. With the costs already sunk, Shell is about to bring home the cash ready for either more mega developments or a mega exploration campaign in future years. To think Analysts were at one point writing this bad boy off.
Now to finish, I believe Shell saw potential in Senegal to be another major reserve base. In FARs permits alone there were multiple fan play targets, combined with the shelf edge. That would entice anyone searching for the new Nigeria. Problem was the risk, was too great for Shell, given inconclusive CSEM results and a 3D, which may have not been of suitable quality to drill off. Shell leave when the risk is too great or things are not as rosey as they first appeared. They are not a company to let the grass grow under them, which is what many believed was happening over the last few years, given they weren't increasing reserves on a large scale. They prepared for the future. As for the whole leaving something on the table in Mauritania, I believe Shell would probably be glad with that result. Other companies had to deal with the headaches of developing those plays.
I have always said I'm optimistic about a well. I just refuse to wear rose coloured glasses. It comes down to whether the risk level of the plays is acceptable for the major. What we do know is 3D didn't do it for Shell and neither did CSEM. The thing is with O&G you can always speculate and make assumption for conversation. Fact is you never know what's going on, how its going to play out or what others are thinking.
In no way am i criticising anything you had to say plugged, just adding my own commentary. Healthy debate always keeps the folks interested in FAR.
Some comments from Rigzone about Shell (While everyone thought they were losers in the GFC, they were in fact winners):
"The oil business used to be simple. Find oil. Drill hole. Sell oil. Buy Stetson and private jet.
These days, you have to corral an army of engineers in the desert to build an enormous factory to transform natural gas into a liquid to be used like oil. The capital cost of Royal Dutch Shell's Pearl gas-to-liquids plant in Qatar is a cool $18 billion or more -- 10% of its market capitalization. Like Chevron's Gorgon liquefied natural gas project offshore Australia, it shows what big integrated oil companies are capable of.
But have they neglected bread-and-butter exploration for lower risk, lower return engineering projects? Certainly, investors are unimpressed. A decade ago, the international oil companies (IOCs) accounted for 79% of energy sector market capitalization and nearly all its net income. Today the figures are 53% and 62%, according to Sanford C. Bernstein. Shell trades at a discount of 13% and 36% respectively to the 2010 forward price earnings multiples at Petroleo Brasileiro and BG Group. But their estimated five-year average output growth is 5% and 9% compared with Shell's 3%, around the IOC average.
If there is a premium on growth, why have the IOCs not spent more on exploration? The question is a little unfair. The majors are so big they spend billions simply replacing the barrels they produce. Geopolitics and resource nationalism have narrowed growth options.
It takes a big discovery to move the needle. Shell more than doubled its exploration budget to $1.4 billion between 2004 and 2008 when it represented 3% of net cash from operations. But contrast that with the 16% of net cash from operations spent by the smaller BG which has made exciting finds offshore Brazil, alongside Petrobras, and West Africa. That's why Bernstein analyst Neil McMahon questions whether IOC executives have sufficiently examined the merits of exploration over one-off engineering marvels. Facilities like Pearl have to be built on giant, long-life gas fields which are rare.
Intriguingly, Shell, scaling back development of its Canadian high-cost tar sands operation, has bumped up its exploration budget to $3 billion, around 10% of capex. But could it spend even more? With their huge upfront cost sunk in 2011, Shell's two Qatar projects will generate $4 billion a year in cash flow. They will be nicely geared to any rise in oil prices at a modest unit cost of $6 per barrel of oil equivalent. Few IOCs may be as well placed as Shell to take on more exploration risk."
(20min delay)