Recent months have seen Eco Atlantic Oil & Gas (LSE:ECO) take significant steps forward at its Orinduik block off the coast of Guyana alongside partners Total and Tullow Oil. With two discoveries de-risking the asset significantly and opening up numerous new prospects and leads, last week saw Eco announce that plans for follow-up drilling in 2020 have now begun. Here, the firm’s chief executive and co-founder Gil Holzman builds on this and explains why he believes the partners have only scratched the surface at what could be ‘one of the best exploration blocks in the world’.
Building up a picture
Eco Atlantic holds a 15pc position in Orinduik alongside Total, which has a 25pc stake, and Tullow Oil, which owns the remaining 60pc and also operates the block. To recap, Orinduik covers 1,800km2 in shallow water offshore Guyana and is adjacent to ExxonMobil’s Stabroek Block where 6 billion barrels of recoverable oil equivalent is estimated to span 13 discoveries.
Map showing Orinduik’s prospects and its position relative to regional discoveries (Source: Eco Atlantic)
After completing and analysing an extensive 3D seismic survey programme between 2017 and 2018, the partners launched into their maiden drilling programme over the block earlier this year. This work, which targeted two particularly well-defined prospects, led to discoveries Jethro-Love and Joe-1.
Jethro-Lobe, which was announced in August 2019 following the drilling of the Jethro-1 exploration well, encountered an initial 180.5ft of net high-quality oil pay located in Lower Tertiary sandstone reservoirs. This supported recoverable oil resources and confirmed the continuance of a petroleum system onto Orinduik, updip of prolific discoveries at the nearby, ExxonMobil-operated Stabroek Block.
Shortly afterwards, in September 2019, the JV partners announced that another discovery had been made by a second exploration well called Joe-1. The well encountered 52ft of continuous thick sandstone of the Upper Tertiary age, opening up a new play and further proving up the presence of recoverable oil resources at Orinduik. Meanwhile, thinner sands above and below the principal discovery indicated the possibility for incremental pay.
Although work to define the extent of both discoveries fully is ongoing, Holzman tells us that they already hold a vast amount of significance for the Orinduik block as a whole:
‘Firstly, it is obviously incredibly important that we have discovered oil at our first two Orinduik exploration prospects. Secondly, the discoveries open up the entire Upper Tertiary and Lower Tertiary horizons for the rest of the Orinduik block. We already knew that the Lower Tertiary horizon existed because of ExxonMobil’s Hammerhead discovery, and we can now see that this extends onto our block. The Upper Tertiary horizon, however, is entirely new for Guyana. It is also much shallower than the Lower Tertiary – something that has very positive economic implications. Indeed, whereas Jethro cost $48m to drill, Joe cost just $20m.
‘Finally, the two discoveries provide a working proof of concept for our 3D seismic model, as the results follow what we had predicted. This gives us a great deal more confidence, and we continue to read and understand our results moving forward.’
Updated CPR
With Jethro and Joe giving rise to numerous new Orinduik prospects and de-risking existing nearby leads considerably, Holzman says the partners also plan to update their competent persons report (CPR) for the block. A new CPR released in March 2019 put Orinduik’s estimated gross unrisked prospective resources at nearly four billion barrels of oil equivalent across a total of 15 leads. Eco’s 15pc share of this figure comes in at 596.4 million barrels of oil equivalent.
With these figures in mind, Holzman believes that the Orinduik partners have only just scratched the surface of the block’s potential with their work to date.
‘We may update the CPR once we have completed our analysis of our current discoveries. Not only will this analysis potentially add new targets and leads, but it is also already suggesting upgraded chances of success across targets already identified in proximity to the discoveries because they share characteristics.
‘The discoveries open a bright future of additional exploration work in the years to come. This is one of the best exploration blocks in the world right now because it has so many prospects and plays. One should also remember that these two discoveries, although significant in size, are relatively smaller in comparison to other prospects that we see across the block. We are just at the beginning of what should potentially be a multi-billion-barrel block.’
Next steps
As highlighted in last week’s update, the Orinduik partners have now begun to organise a follow-up drill programme for 2020. Holzman says that this work remains in the preparatory stage as the businesses continue to glean as much information as possible from Jethro and Joe to inform their next round of work. In particular, the firms hope to get a full sense of the geological scale of the deposits, how much oil they contain, the porosity of the sands encountered, and the gravity of its resource.
Meanwhile, they are also waiting for the results of a recently-spudded well in an adjacent block called Carapa held by Repsol with same Tullow and Total as partners. This will target a third Cretaceous horizon that also contains on several of Orinduik’s prospects.
‘Because we have so many drilling targets – some are Cretaceous, some are Upper Tertiary, and some are Lower Tertiary – we first need to see how Carapa behaves and finish our work at Joe and Jethro before we will decide our strategy for next year,’ adds Holzman.
‘This strategy could take many forms. For example, if we want to take the fast route to production, then we could potentially appariase Jethro. Likewise, if we would like to come up with additional plays or discoveries, we can select new leads to test. This is a good ‘problem’ to have- we have so many targets and so many prospects that we should first decide what strategy is best to take and then choose the actual drilling targets from there.’