Heritage Gas Discovery the Largest in Iraq for 30 Years
|January 26, 2011||Filled under All Dinar Trade Articles|
LONDON (SHARECAST) – Heritage Oil has uncovered the largest gas field to be discovered in Iraq for more than 30 years, but the news took the market by surprise as the field had been expected to contain oil rather than gas.
With testing of the Miran West-2 well in Kurdistan complete, management believes the Miran field is the sixth largest gas field discovered in Iraq with sufficient volumes to justify a standalone commercial development.
Shares fell 17% in early trading despite the significant find, with broker Panmure Gordon saying that “there is likely to be some disappointment for many of the more optimistic followers who had hoped that the well would prove up significant new oil reserves.”
“The advantage with oil is that the lead times and unit development costs tend to be smaller, and that the net realisable price tends to be higher (on a barrel equivalent basis). This leaves gas as a poorer cousin to oil,” the broker notes.
However, analyst Peter Hitchens says that the level of gas “is very exciting, as it should be more than sufficient to allow a major development with sufficient gas to power the nascent gas market in the country and look at the potential of exports.”
The company estimates that the Miran West structure has P90 – P50 (90% – 50% likely) gross in-place volumes of gas of between 6.8 – 9.1 trillion cubic feet (TCF) with 42 – 71 million barrels (MMbbls) of condensate and 53 – 75 MMbbls of oil.
The P10 (10% probability) upside has been estimated at 12.3 TCF.
Management estimates Heritage has average (mean) risked contingent and prospective resources in Miran West and Miran East of 744 million barrels of oil equivalent, based on a 75% working interest.
The well results have confirmed three additional pay zones within Lower Cretaceous and Jurassic formations, in addition to the pay zone identified in the Upper Cretaceous in the Miran West-1 well.
Additionally, well results have established that the Miran Field contains two hydrocarbon systems, with oil in the shallower Upper Cretaceous section and, contrary to initial expectations of oil reserves, wet gas/condensate within the deeper Lower Cretaceous and Jurassic formations.
Heritage is looking to expedite the drilling programme on the Miran West structure as the 3D seismic data indicates there are numerous promising fracture networks across the structure.
The 2011 capital expenditure programme has been increased to $100m while the 2012 programme has been upped to $125m, the company said.
“We are considering various development options including a tie-in to planned infrastructure that will achieve first production for both oil and gas in 2015. This discovery has the potential to generate substantial further value for our shareholders and benefit the people of Kurdistan and Iraq,” said Heritage’s chief executive officer, Tony Buckingham.
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