Country Information
Kurdistan
As a member of a consortium operated by Niko Resources, Groundstar entered into its first Production Sharing Contract ("PSC") with the Kurdistan Regional Government ("KRG" or "Government") for the exploration, development and production of petroleum resources in the 846 square kilometer Qara Dagh Block in Sulaymaniyah Governorate of the Federal Region of Kurdistan, Iraq, on May 14, 2008. Groundstar has a 6% net participating interest.
The Block lies on trend with existing discoveries, a portion of which covers a large unexplored 65 kilometer long by 6 kilometer wide surface structure with existing oil seeps. Of interest, Qara Dagh translates into Black Mountain.
The consortium operated by Niko has a 60% participating interest that is not subject to further dilution by the KRG. The Government will have a direct 20% interest carried exclusively by the consortium. The remaining 20% was assigned equally to Groundstar's partners, Niko Resources and Vast Exploration on September 22, 2009.
The obligations under the PSC include a onetime signature bonus and capacity building bonus paid to the Government within 30 days from the execution date of the contract. Annual contributions to personnel, training and technological funds established by the Government, as well as community support contributions are to be paid over a period of 15 months to assist with infrastructure projects in the area. The consortium will also be responsible for paying its proportionate share of certain production bonuses in the case of a commercial discovery. The remaining minimum work program obligations represent an exploration commitment which includes the acquisition, processing and interpretation of a minimum of 300 kilometers of 2D seismic data and drilling of one well during the first exploration period.
On January 18, 2010, the Corporation announced that AJM Petroleum Consultants completed an initial resource assessment of Qara Dagh Block. AJM has estimated an un-risked best estimate of 2.7 billion barrels of petroleum initially in place as of December 31, 2009. This assessment was prepared by the operator on behalf of the consortium. The consortium, operated by Niko Resources, completed the award of contracts for supply and services required for drilling of the Qara Dagh - 1 well and two potential additional wells. The operator was also engaged in drilling a water well and well site and access road construction for the Qara Dagh - 1 well, which is expected to spud in April 2010. The operator revised the cost for drilling the Qara Dagh - 1 well to $30.9 million, all inclusive, based on recent price indications received. The Corporation’s share of this cost is $2.47 million.
Figure 1 Figure 1:
Qara Dagh Quickbird Image with Seismic Grid - In June 2009, the consortium completed the acquisition of 355 kilometers of 2D seismic over the surface structure that dominates the Qara Dagh block. Processing has been completed and three potential drilling locations have been identified from interpretation of the seismic. Long lead drilling items have been ordered. The consortium is evaluating bids for drilling one well.
Figure 2 Figure 2:
Qara Dagh Depth Structure Map and Seismic Line QD09-13 -. The Qara Dagh #1 wildcat will drill to approximately 4,000 meters and could penetrate up to seven potential reservoirs in the Cretaceous, Jurassic and Triassic in a seismically closed structure of 100 to 140 square kilometers in area.
Heritage Oil's recent discovery at Miran West #1 on a large anticline is currently being tested. It has a potential OIP of 2.3 to 4.2 billion barrels (source-Heritage Oil Website) in fractured Cretaceous carbonates. Together with the currently drilling Kurdamir #1 well on the Western Zagros block, these positive developments support the consortium's plans to drill an exploration well on the adjoining Qara Dagh Block.
Africa:
Egypt Exploration Blocks
Figure 3 Figure 3:
Egypt Exploration Blocks - The Republic of Egypt, approximately 1 million square kilometers in area and with a population of about 80 million, is considered to be one of the most stable countries in Africa. The official language is Arabic with English and French being widely understood. Egypt's GNP is derived from agriculture 17%, industry (including oil and gas) 33% and services (including tourism) 50%. Cairo is the administrative capital of Egypt.
Oil was first discovered in 1886 and the country continues to attract local and foreign multinational companies to explore for, develop and produce oil and gas resources. The country currently produces approximately 700,000 barrels of oil per day from proven reserves of 2.7 billion barrels. In excess of 50% of these reserves have been discovered within the complex faulting and associated traps of the Gulf of Suez rift basin system.
Continental rift basins, while being found in many parts of the world are of particular interest in Eastern Africa and the Middle East where they have become highly productive and prospective exploration targets. In addition to significant hydrocarbon accumulations in the Gulf of Suez, rift systems form the geological environment productive in the Muglad Basin in Sudan, and the Marib Basin in Yemen. More recently, international explorers have turned to the Upper Egypt region where a significant trend of rifting, the Nuqra/ Kom Ombo basin system has been defined.
Groundstar has a working interest in two Upper Egypt blocks: the West Kom Ombo block which lies west of the Nile River opposite the cities of Luxor and Aswan and the West Esh El Mellaha block onshore Gulf of Suez west of the city of Hurghada.
West Kom Ombo Block (WKO)
On July 4, 2006, Groundstar Resources entered into a Farm-in agreement with Pan Pacific Petroleum Egypt for the West Kom Ombo block (42,291 square kilometers) in Upper Egypt, one of the largest onshore blocks in the country. Groundstar is the operator. The Corporation is paying 100% of the first US $7 million of exploration expenditure, and paid a signing bonus of US$ 100 thousand to acquire a 60% working interest in the block. The initial phase of two years began on September 17, 2006, and had a gross financial commitment of US$ 3 million. After the gross expenditure of US$ 7 million the Corporation will pay 60% of expenditure to retain its 60% working interest. As of April 30, 2009 the Corporation has spent approximately US$ 6.5 million of the US$ 7 million.
A data room remained opened in Cairo to search for a potential Farm-in partner for the WKO drilling. There are currently five industry partners evaluating this Farm-in opportunity. The South Malak-1 well in the WEEM Block encountered 20% to 30% total gas readings with significant C3 to C5 components over the interval between 10,555 ft to 11,960 ft. In a strategic move, the Corporation has entered into an agreement to exchange its 20% working interest in the WEEM Block for an additional 20% working interest in the WKO Block. The agreement is subject to certain adjustments and Egyptian governmental approval, which is expected in the first half of calendar 2010.
Figure 3 Figure 3:
West Kom Ombo (WKO) Block - The figure illustrates the location of the WKO block relative to Centurion's block immediately to the east and Transglobe's block east of the Nile River. The WKO block originally totalled 42,291 square kilometers (approx. 10.5 million acres). After the mandatory 25% relinquishment of the original area in September 2008, the block area is currently 31,520 square kilometers. Groundstar has a 60% working interest. The green lines are the location of the 2D seismic grid acquired by Repsol in 1997 and the grey lines Groundstar's 2008 2D seismic survey. Groundstar re-processed Repsol's legacy seismic grid of approximately 850 kilometers in 2007.
The nearest well control is in the Kom Ombo area about 75 kilometers to the east of the WKO block. Repsol drilled several wells there in the 1990s and Centurion Energy is currently conducting a successful exploration program. The Centurion Kom Ombo #4 (Al Baraka #1) well discovered the Lower Cretaceous El Baraka Field in 2007 recovering 150 barrels/day of light gravity oil (37° API) on test establishing the presence of an active petroleum system in the area. The Centurion Al Baraka #2 appraisal well recently discovered a new Lower Cretaceous reservoir which has significantly increased the oil reserves of the field. Centurion started a two to four well drilling program on the Kom Ombo block in late September 2009. The first well is an appraisal in the Al Baraka Field which will be followed by a wildcat on a separate structure. The other two wells are optional depending upon the drilling results.
Groundstar entered the first Exploration phase of three years on September 17, 2008, with a work program commitment to drill 2 exploration wells before September 17, 2011, with a minimum financial commitment of US$ 4 million, of which 85% has already been spent.
In late January 2009 Groundstar completed a 2D detailed seismic program over five previously identified structures on the WKO block. The contracted CGG-Ardiseis seismic crew acquired 27,999 VPs (700 kilometers). The data quality is significantly better than the legacy seismic previously acquired in the area. Two prospects were confirmed after interpretation of the new seismic. Three additional structures need to be confirmed with further seismic coverage. Groundstar is seeking Farm-in partners to participate in drilling two exploratory wells on the block.
Groundstar completed interpretation and mapping of the 2008 seismic program. The top of the Lower Cretaceous time structure map confirms two structural prospects at approximately the same depth as the Centurion Al Baraka Lower Cretaceous discovery. Three structural leads and one area of interest were also identified.
Figure 4 Figure 4:
Geological Cross Section across West Kom Ombo Block -The geologic cross section starts in the Kom Ombo area that is currently Centurion Energy's center of activity. The geology in the Kom Ombo area is expected to persist to the WSW across the West Kom Ombo block based upon the deeper seismic events. The structural highs also increase in size to the west. In addition to the Lower Cretaceous structures the seismic shows evidence of deeper structure that could be of Jurassic age or older.
Figure 5 Figure 5:
Gustavson Associates Recoverable Resource Estimate for West Kom Ombo - Groundstar contracted Gustavson Associates of Boulder, Colorado to undertake an independent NI51-101 compliant resource assessment of the block. Gustavson re-interpreted the re-processed Repsol seismic data and well results prior to the completion of the resource estimate calculations. It recognized the same five prospects mapped previously by Groundstar on the legacy seismic. The recoverable resources for the prospects were determined from a single Lower Cretaceous sandstone reservoir. As the Lower Cretaceous is interpreted to be a thick sandstone/shale sequence, Gustavson states that multiple reservoir zones are possible as has been reported by the drilling results of the Centurion Al Baraka #2 appraisal well in the Al Baraka Field. In addition, no resources were assigned to the potential deeper structures demonstrated on the Repsol seismic sections.
Figure 6 Figure 6:
West Kom Ombo Summary Map - Prospects B and C have been confirmed. Groundstar's original Prospects A, D and E mapped on the legacy seismic have been designated leads and require additional seismic. A large surface feature to the west of Prospect B is considered an area of interest for a potential subsurface structure. Extensive portions of the block lack seismic coverage so the possibility of finding additional prospects and leads is high.
Figure 7 Figure 7:
Seismic Line Fence - The seismic line fence location, as shown by the black dashed lines on Figure 6, crosses Prospect B, the east corner of Lead E and the east part of Prospect C. The yellow event is believed to be the Top Lower Cretaceous. The deeper green events could represent an Early Cretaceous horizon and the Top Jurassic respectively.
Figure 8 Figure 8:
Prospect B on Lower Cretaceous Time Structure Map and Seismic Line GSR08-05- Groundstar proposes drilling the first exploratory well on Prospect B to a TD of 3,350 meters (11,000 feet) for Lower Cretaceous and Upper Jurassic sandstone objectives. Prospect B has a four-way dip closure 130 square kilometers in area in two separate structures. Fault closure would combine these highs into a single large structure 335 square kilometers in area on the Lower Cretaceous Time Structure Map. The Corporation plans to drill this structure after a Farm-in partner is found.
Figure 9 Figure 9:
Prospect C on Lower Cretaceous Time Structure Map and Seismic Line GSR08-09 - Prospect C has a potential area of four-way dip closure of about 155 square kilometers with the eastern one-third (55 square kilometers) of the structure having the best seismic control.
West Esh El Mellaha Block (WEEM)
Figure 10 Figure 10:
West Esh El Mellaha (WEEM) Block - Groundstar Resources acquired a 20% working interest in the prospective West Esh El Mellaha (WEEM) block in the southern Gulf of Suez area. Aminex is the operator of the block. The original WEEM block covered 1,328 square kilometers on a western arm of the major northwest trending Gulf of Suez rift system. The sedimentary section is predicted to be in communication with and consistent with the Gulf of Suez area thereby offering access to proven source rock while the complex structural history of the area indicates the presence of potential traps. Infrastructure essential for production and transportation of oil and gas is mature in the Gulf area, and is expected to readily accommodate production from any new discoveries on WEEM.
Adjacent to WEEM in the southeast, five oil accumulations have been discovered: Rabeh, East Rabeh, Tanan, Tawoos and Wadi El Sahl. Current production, operated by Lukoil, is about 12,000 barrels of oil per day. To the east of WEEM, both on-shore and off-shore, numerous prolific oil accumulations have been discovered in the Gulf of Suez rift basin environment.
The Corporation's minimum financial commitment for this phase is a net expenditure of US$ 3.6 million. The minimum work program for the block is the drilling of 3 exploration wells.
In 2008, two wells were drilled by the partners. Malak #1 reached a total depth of 3,694 meters (12,116 feet), encountering elevated gas readings, but was subsequently abandoned as a dry hole. NW Tanan #1 was drilled next to a depth of 2,553 meters (8,375 feet) without encountering reservoir rocks or hydrocarbon shows. It was plugged and abandoned. The total net cost to Groundstar for drilling the two wells was US$ 1.8 million.
The third commitment well, South Malak #1, was spudded on August 16, 2009. The location is 1.9 kilometers southeast of Malak #1 and has a prognosed TD of 3,200 meters (10,500 feet) in the Basement. The reservoir objectives are the Miocene Nukhul sandstone and the Pre-Miocene Matulla and Nubian sandstones. Updates on this well will be provided by news releases whenever appropriate.
At the end of the Initial Exploration Period (September 2009), the operator released 25% of the concession area in the marginal portion of the block in accordance to the concession agreement. The remaining block area is 996 square kilometers.
Figure 10 Figure 10:
West Esh El Mellaha Resource Estimate - There are currently seven undrilled, seismically defined prospects on the WEEM block. Four prospects were identified by Aminex and three by Groundstar. The P50 contingent prospective in-house resource estimate for the seven prospects is 96 million barrels (19.2 million net to Groundstar). Interpretation work is continuing on the seismic control and well results so the resource estimate may be subject to revision as the work progresses.
On January 25, 2010, the Corporation entered into an Asset Exchange Agreement ("Exchange Agreement"), with Karl Thomson Energy Limited, corporate successor to its partners in Egypt, which provided that the Corporation would assign its 20% working interest in WEEM Block in exchange for an additional 20% working interest in WKO Block. The agreement contains provisions for monetary adjustments and is subject to Egyptian government approval, which is expected in the first half of calendar 2010.
South America
Guyana: Takutu Basin PPL
Figure 11 Figure 11:
Guyana Country Map - On March 11, 2008 Groundstar obtained a Farm-in partner, Canacol Energy Ltd., for the Takutu Basin. The fiscal terms for the Farm-in Agreement obligates the Farmee to pay 100% of all exploration expenses for the first US$ 12 million to earn an undivided 55% working interest in the block. The Corporation has completed community consultation and environmental impact management studies. It has procured drilling and tubular equipment, and has constructed the drill site pad for the Apoteri K-2 Prospect and the staging area for the Rewa Prospect.
In May 2009, it was announced that Canacol will acquire an additional 35% working interest in the Petroleum Prospecting Licence (PPL) in the Takutu Basin in exchange for a cash payment to Groundstar of US$ 3.45 million. Canacol's net working interest in the PPL will increase to 90%; Groundstar's net interest will reduce to 10% which will be carried by Canacol to first commercial production. Groundstar will remain operator of the block through to completion of the first exploratory well expected to be drilled in the first half of 2010. Under the terms of a new (May 22, 2009) 3 year Petroleum Agreement with the Guyana Geology and Mines Commission the operator is obliged to drill one exploration well by May 22, 2010, and a second well by May 22, 2011.
Figure 12 Figure 12:
Takutu Basin: Groundstar PPL, Seismic Grid, Wells and Prospects - Home Oil and Hunt Oil acquired 2,576 kilometers of high quality 2D seismic in the Guyana portion of the Takutu Basin. Three prospects and seven leads have been mapped based on this seismic. The prospects are named Apoteri K-2, Rewa and Pirara River. The Apoteri K-2 well will test a structure 65 square kilometers in area on the Northern Savannah Arch on which the Karanambo #1 well was drilled in 1982, testing 42° API oil at a rate of 411 BPD from fractured volcanics and clastic sedimentary rocks.
The Rewa Prospect is 225 square kilometers in area and consists of two large fault blocks near the northeastern margin of the rift basin. Seismic data suggests that it has both fractured and conventional sandstone reservoir objectives at shallow drilling depths. The Pirara River Prospect is 55 square kilometers in area and located on the southern side of the Northern Savannah Arch. Fractured reservoirs similar to those found in Karanambo #1 will be the objective.
Drilling Plans for 2010: The Corporation, through its subsidiary, is finalizing the award of contract for drilling of one well with one potential addition. A new office has been leased in Georgetown in preparation for the drilling phase. The corporation is on schedule to drill Apoteri K-2 well in the first half of calendar 2010. The new well is roughly 600 meters from a discovery made by Home Oil in 1982. Rewa #1 would be drilled to a proposed total depth of 950 meters into the Upper Apoteri Volcanics. Apoteri K-2 would be drilled at the crest of the Northern Savannah Arch near Karanambo #1 to a proposed total depth of 2,770 meters in the Apoteri basalt. The same oil-bearing fractured reservoir is anticipated. The Pirara River Prospect is prognosed to drill to a total depth of 3,000 meters into the Upper Apoteri Volcanics. This prospect is favorably located on the Northern Savannah Arch near to the Goodhope Graben oil kitchen.
Karanambo #1 flowed 411 BOPD based upon five hour long DST #7 over a 105 meter thick fractured basalt and fine grained clastic sequence. Further analysis of the DST indicated a theoretical Productivity Index of over 1,200 BOPD. Similar types of fractured volcanic reservoirs are producing oil at sustained rates of 350 to over 1,000 BPD in the Phetchabun rift basin in Thailand. Log analysis by a leading fracture specialist indicated a fractured reservoir in Karanambo #1 capable of significant production. It is anticipated that a similar fracture system is present in Apoteri K-2, Pirara River and Rewa. Extended testing of a fractured oil-bearing reservoir would be conducted in order to determine the productive capacity of the wells.
Syria
On April 24, 2008 Groundstar announced that it had completed negotiation of Production Sharing Contracts for Blocks XIV and XVI in Syria. These blocks are immediately adjacent to blocks XIII and XV operated by Shell.
Groundstar initially was the operator and retained a 100% working interest in both blocks that totalled approximately 3.35 million acres. The initial exploration period was for four years from the time the contracts would have been ratified by the Syrian Parliament.
The Corporation acquired and interpreted 4,600 kilometers of legacy 2D seismic data and related well information for the Syrian blocks. As a result, several leads were developed. These leads have been presented to a number of companies in an attempt to secure a Farm-in partner. These efforts were unsuccessful due to the large financial commitment required and the uncertainty in the global financial markets.
On September 10, 2009 the Corporation announced that it was returning Blocks XIV and XVI to the Ministry of Petroleum and Mineral Resources.
The Third Bid-Round blocks are expected to be re-tendered in the last Quarter of 2009. Groundstar will be participating in the upcoming Tender for Exploration and EOR projects.