Sud Remada Permit
The Sud Remada Permit currently covers 868,819 gross acres and is located onshore in the far southern region of Tunisia bordering with Libya to the east, approximately 100 kilometres southeast of the Mediterranean Sea shoreline. The Sud Remada Permit is indirectly contracted to Chinook and its partner (Rigo Oil) through a production sharing agreement with ETAP. Chinook indirectly holds 86% of the contractor's share and is the designated operator of the Sud Remada Permit.
The Sud Remada Permit, originally 1.2 million acres in size prior to the grant of the Bir Ben Tartar Concession and the first relinquishment of 20% of the acreage, was initially awarded as a seismic option to SVI on April 20, 2004, for a two-year term based on a work commitment requiring at least 200 kilometres of two-dimensional seismic data to be shot. SVI fulfilled its initial work commitment under the seismic option by acquiring 225 kilometres of two-dimensional seismic data and by re-interpreting over 1,000 kilometres of two-dimensional seismic data. In September 2005, the Sud Remada Permit was converted to an exploration permit for a three year period with a commitment of one well targeting the Ordovician formation to a depth of 3,000 metres. Subsequent to the conversion to an exploration permit, the Oum Zoughar #2 well was spud on November 23, 2005. Subsequent to various testing and completion activities, the oil rates of the Oum Zoughar #2 well were determined to be too low to be economic. The well was subsequently suspended pending further evaluation.
SVI extended the initial term of the exploration period with no relinquishments for two one-year periods by committing to additional work on the block including seismic and the TT-2 well. The TT-2 well at Sud Remada was spud on March 28, 2008, and drilled to a total depth of 1,500 metres on April 16, 2008. After various completion and testing activities, the well sustained flows of light oil (42° API) with some gas at approximately 250 Bbls/d. The well was brought on production to a single well battery on long term test on March 22, 2009. The well produced at an average rate of 87 Bbls/d during 2012. The produced oil is trucked to La Shikra for sale and for loading onto a shipping tanker.
Chinook applied for a third one year extension, with no relinquishment, with the commitment to drill an exploration well. TT-3 was rig released as a cased and suspended well on December 21, 2010. The Sud Remada Permit has two renewal periods of three years, each with a corresponding one well drilling commitment. Under the first renewal, 20% of the acreage has been relinquished resulting in the remaining area of the permit being 868,819 gross acres. An additional 16% of the acreage will be relinquished during the second renewal. A two year extension to each of the renewal periods is available with no additional relinquishment of acreage and a negotiated commitment. A third renewal period of three years can be awarded as well as a result of SVI making a discovery during the initial period.
Chinook has drilled two successful exploration wells on the Bir Ben Tartar structure; TT-3 in December 2010 and TT-4 in March 2011. These two wells have confirmed zones, interpreted as hydrocarbon bearing in the discovery well, extend over a significant portion of the 58 square kilometre structure. TT-5, TT-6, TT-7, and TT-8 were drilled, completed, and put on production over the third and fourth quarter of 2011.
Chinook agreed to the plan of development with ETAP and, on April 27, 2011, the Bir Ben Tartar Concession, a 86,981 gross acre production concession, was granted out of the Sud Remada Permit and received approval of the Plan of Development by the DGE.
Chinook was granted a three year extension to the permit until September 23, 2014 by committing to drill one exploration well. Subject to rig availability, the El Bell exploration well is planned for the first half of 2013, and additional 2D/3D seismic is anticipated to be acquired in the second half of 2013.
Bir Ben Tartar Concession
The Bir Ben Tartar Concession is 86,981 gross acres and was approved out of the Sud Remada Permit on April 27, 2011 and subsequently gazetted in Tunisia on October 27, 2011. The concession has a validity period of 30 years from the date of award.
Chinook indirectly holds an 86% contractor interest and is the operator of the concession. Chinook's partner in the concession is Rigo Oil. The concession is governed by a production sharing agreement.
Production from the Bir Ben Tartar Concession is primarily from the Ordovician level. Currently there are 10 producing wells on the concession that flow naturally and two that will require artificial lift to produce. Oil is produced to tanks on each wellsite and produced water is separated and evaporated. Produced oil is trucked to the Port of La Skhira for storage pending export by tanker. Chinook schedules the lifting, finds the buyer, agrees to the price (typically within $1.00/Bbl of a posted dated Brent price) and receives payment in Barbados within 30 days of the lifting. The Bir Ben Tartar Concession exited 2012 at a gross production rate of 3,346 Bbls/d.
During 2012, one vertical well and four horizontal wells were drilled. Three wells were brought on production with the fourth well planned to come on in the first quarter of 2013. The horizontal wells are multi-stage hydraulically fracture stimulated wells.
During 2013, Chinook intends to continue the development of the Bir Ben Tartar Concession with a planned drilling program consisting of six wells and the start of an infield gathering system to gather production to a central production facility. It is anticipated that at least four wells will be horizontals and one vertical will very likely be completed as a water disposal well in a location where it may also provide some technical information on the eventual waterflood potential of parts of the field.
The Adam Concession that covers 212,510 gross acres is located onshore southern Tunisia approximately 570 kilometres south of Tunis in the hydrocarbon producing Ghadames Basin. Chinook indirectly acquired a 5% non-operated interest in the producing Adam Concession from Talisman Energy Inc. effective January 1, 2009 pursuant to the acquisition of the shares of TRTL. The Adam Concession is operated by ENI Tunisia B.V. ("ENI") which holds a 25% working interest in the concession.
Production is from ten fields: Adam, Hawa, Nour, Karma, Nadir, Mejda, El Azzel N, Iklil, Dalia and Janet. The producing zones include the Acacus, Tannezuft and Ordovician. The average gross production from the Adam Concession for the 12 months ended December 31, 2012, was 6,904 Bbls/d of crude oil and 28.7 Mmcf/d of natural gas. The oil produced from the Adam Concession is light sweet crude (42 API) which is priced at a slight premium to Brent. The natural gas is sold to Societe Tunisienne de lElectricite et du Gaz, the Tunisia utility company known as STEG.
The oil and natural gas is transported to a facility at Oued Zar. The facility, which was initially built for other ENI operated assets, is operated by ENI and jointly owned by ENI, ETAP, OMV AG and, indirectly, Chinook. Natural gas production from the Adam Concession is currently partially constrained due to export pipeline constraints.
Although Acacus oil potential is mature on the Adam Concession, Acacus and Ordovician natural gas prospectivity is substantial and not fully developed pending completion of the Southern Tunisian Gas Project, a pipeline project to increase takeaway capacity, which is proposed to commence in 2013 and be completed in 2015.
The expiry date of the Adam Concession is August 31, 2033.
Borj El Khadra Permit
A 10% non-operated interest in the Borj El Khadra Permit was also indirectly acquired from Talisman Energy Inc. effective January 1, 2009 pursuant to the acquisition of the shares of TRTL. The BEK Permit is operated by ENI who retains a 50% interest in the permit. The other interest owner is OMV AG who has a 40% interest. ETAP has the right to participate up to a 50% interest in the permit, subject to the repayment of costs incurred for up to 50%, after which all the partners' interests would be reduced proportionally. To date, five exploration wells and one appraisal well have been drilled on the BEK Permit. The BEK Permit covers 707,710 gross acres.
The third renewal period of the Borj El Khadra Permit will expire on June 13, 2013. The operator has submitted a work program of 3D seismic and a two well commitment to extend the permit through to June 12, 2015.
The Bochra #1 exploration well spud on January 19, 2011 with the primary objective to investigate the Silurian Acacus and Tannezuft reservoirs and secondarily, the Ordovician reservoirs. The well was completed and tested from the Acacus and Ordovican levels and is currently suspended waiting on the plan of development and concession application to be submitted by the operator.
During the last two years, the partners in the permit have acquired 3D seismic over 70% of the BEK Permit, the most recent survey being acquired during the first quarter 2013. The BEK Permit is located down-dip from the Adam Concession and is considered prospective for natural gas based on offsetting fields that define the onset of the natural gas window as the source rock maturity increases. Partners in the permit are committed to at least one exploration well in 2013 from the leads identified on the survey and expect full development of the permit to progress in parallel with the development of the Southern Tunisian Gas Project.
There is considerable industry interest in the prospective development of the Tannezuft shale as an unconventional resource play. Chinook has participated in evaluation of the shale on its lands and shares the view of prospectivity. Chinook's Adam Concession, BEK Permit and Jenein Permit are particularly well located and will benefit from information gained by shale focused wells scheduled to be drilled by an offset operator later in 2013.
The Cosmos Concession is 108,726 gross acres and located 50 kilometres offshore Tunisia in the Gulf of Hammamet in approximately 120 metres of water. Cosmos is potentially productive from the Birsa sand at a depth of 1,500 metres (true vertical depth subsea) and contains a number of separate fault blocks, the best defined of which is the Cosmos South A block. The Cosmos reservoir was discovered in 1983 with the Cosmos South 1 (CMS-1) well. The oil is a light sweet, high quality oil of 39oAPI normally priced at a slight premium to Brent.
Chinook indirectly acquired a 100% interest in the Cosmos Concession from two arm's length companies. ETAP, after reviewing the proposed development plan, exercised its right to participate for a 20% working interest, with Chinook indirectly retaining an 80% working interest prior to entering the farmout agreement with NZOG as described below. As of April 29, 2009, ETAP is a full paying partner in the field development.
The DGE approved a subsea plan of development consisting of two production wells and one water injector well in April 2009. Production will be tied back to a floating production storage and offtake vessel (FPSO). The project was initiated in 2009 but suspended following issues in the wake of the global financial crisis. The original approval expired on April 21, 2011 but was extended for two years on the basis of economic conditions existing at that time. This current approval expires on April 21, 2013 unless development activities begin or an extension is filed before that time. Development activities commenced in 2012. Chinook has completed a thorough evaluation of the concession and has identified several drillable prospects within the concession, including a drilled but untested discovery on the Cosmos K block, that warrant additional investigation.
On December 14, 2011, SVI Barbados entered into a farmout agreement with NZOG whereby NZOG will participate with SVI Barbados in the development of the Cosmos Concession. Under the terms of the farmout agreement, NZOG paid an initial consideration of US$3 million to potentially acquire an undivided 40% participating interest in the Cosmos Concession. Subject to a positive FID to proceed with the development of the Cosmos Concession under a development plan prepared by SVI Barbados, NZOG would pay 100% of SVI Barbados's share of development costs up to US$19 million (in addition to its own share). On March 19, 2013, SVI Barbados and NZOG entered into an agreement pursuant to which each of SVI Barbados and NZOG acknowledged that it had given a negative FID and which amends the farmout agreement so that, if SVI Barbados and NZOG cannot agree on an alternative appraisal program for the Cosmos Concession by April 18, 2013, NZOG's right to complete its earning and acquisition of an interest in the Cosmos Concession will terminate. Subject to final cost estimates and the availability of key components, SVI Barbados and NZOG are considering the merit of proving up additional resources on the Cosmos Concession with the drilling of one of the appraisal satellite structures, ideally by early 2014, as an alternate to progressing the Cosmos South A block development on the basis of existing reserves.
The Yasmin Concession is 23,722 gross acres and is offshore adjacent to and north of the Cosmos Concession. There are two wells which tested oil from the Birsa formation at similar rates to the wells on the Cosmos Concession and management of Chinook believes there is economic potential to develop the concession. A development application was filed with the Tunisian regulatory authorities during 2011 to develop the Yasmin Concession as a tieback to the Cosmos Concession.
In addition to the initial development, Chinook has identified a lead that will be further investigated within the concession as a discovery and future development. There is 3D seismic data available over much of the concession which has yielded the initial development. Additional seismic data has recently been obtained through ETAP and is currently being evaluated. This data will be used to further evaluate the potential of the discovery surrounding the Yasmin-4 well.
The Hammamet Permit was awarded on September 23, 2005 with a primary term of five years. The concession consists of a total area of 924,170 gross acres. Chinook indirectly holds a 35% working interest and is the operator of the Hammamet Permit and has two other partners in the block: Cooper Energy Limited and DNO Tunisia AS (formerly RAK Petroleum Tunisia Limited).
The initial work commitment was to shoot 200 square kilometres of two-dimensional seismic data, re-interpret 2,000 kilometres of two-dimensional seismic and to drill one well to the Miocene level. In excess of 2,000 kilometres of two-dimensional seismic data has been reprocessed and 415 square kilometres of three-dimensional seismic data in addition to 250 kilometres of two-dimensional seismic data has been shot. On the basis of this data, several exploration targets in the Gulf of Hammamet have been identified, one of which was the Fushia prospect. The Fushia FSH-1 commitment well was rig released on June 25, 2010 after reaching a total measured depth of 2,959 metres. The well encountered a 16 metre hydrocarbon column that recovered volatile oil and drilling fluid from a short test. The evaluation of the potential reserves within the Fushia structure is ongoing. The Fushia prospect is located in approximately 85 metres of water in the west-central part of the exploration permit in the Gulf of Hammamet approximately 70 kilometres northeast of the Port of Sousse. Cooper Energy Limited and DNO Tunisia AS participated in the drilling of the FSH-1 well and Chinook indirectly retained an after-earned interest of 35% by paying 8.5% of the costs associated with the FSH-1 well.
Due to the late arrival of the rig to drill the FSH-1 well, Chinook applied to the Tunisian authorities for an extension of the entire Hammamet Permit with no relinquishment of acreage from the permit. The extension was approved for two years, expiring on September 22, 2012 with a commitment to shoot 300 square kilometres of 3D seismic. The 3D seismic program was shot in the third quarter of 2011 over the northeastern extension of the abandoned Tazerka field (80 square kilometres) and over the newly identified Kasserine prospect (220 square kilometres).
Under the first renewal beginning September 22, 2012, 20% of the acreage was relinquished and the first renewal requires a well commitment to be drilled prior to September 22, 2015. Under the second renewal, an additional 16% of the acreage will be required to be relinquished. Each of the renewal periods can be extended by up to three additional years with no further relinquishments and a negotiated work commitment. Chinook and its partners are currently evaluating the prospects identified to date to determine the optimal test well location on the permit.
The Jenein Permit covers 77,097 gross acres and lies on the north central area of the Ghadames Basin. Chinook indirectly holds a 65% working interest and is the operator of the permit. PA Resources AB was Chinook's partner in the Jenein Centre #1 well and earned a 35% working interest in the well and the Jenein Permit by paying for 70% of the costs associated with the well.
On November 16, 2007, SVI obtained the Jenein Permit as a prospecting licence. The permit is under the first phase of exploration that expires on October 14, 2014 and has two optional three year renewal periods available each with a commitment to drill one exploration well for each renewal. The acreage relinquishment under the first renewal is 20% of the block and the second is 16%. Both renewal periods can be extended for three years with no additional relinquishments based on a negotiated work commitment. The initial work commitment under the prospecting license was to shoot 75 square kilometres of three-dimensional seismic and re-interpret 500 kilometres of two-dimensional seismic. During the year ended December 31, 2008, SVI shot 110 square kilometres of three-dimensional seismic data, 46 kilometres of two-dimensional seismic data and re-interpreted over 500 kilometres of two-dimensional seismic data. Subsequent to fulfilling the terms of the prospecting licence, the prospecting licence was converted to an exploration permit on October 15, 2009 with an initial term of five years. Chinook's work commitment under the exploration permit was to drill a single well to a depth of 3,500 metres and to reach the Ordovician formation. In 2010, Chinook drilled a 4,400 metre exploration well (Jenein Centre #1) in the northeast corner of the Jenein Permit to test the potential of the Ordovician formation as well as the Acacus formation. The exploration well was suspended following an unsuccessful completion attempt on the Silurian Acacus formation, however, management of Chinook believes there is potential to make the well commercially productive if a workover on the well can be performed successfully.
The Jenein Centre #1 well fulfills all exploration commitments for the permit. Evaluation plans for future exploration on the permit and Chinook's Ordovician natural gas strategy for the area are being reviewed.
There are three drillable Acacus prospects on the existing 3D data and 70% of the Jenein Permit remains to be shot.