CGX Energy & partners say Guyana investments nearly US$700M

Feb 20, 2023 News

– all eyes on Wei-1 well being drilled in Corentyne Block

Kaieteur News – Veteran operator in Guyana’s offshore basin, CGX Energy along with its joint venture partner, Frontera Energy Corporation recently updated the market about its plan of activities for its Corentyne Block.

Professor Suresh Narine at the International Energy Conference-Guyana 2023

This update was outlined in a joint presentation by the Canadian duo at the International Energy Conference in Guyana which was held from February 14-17, 2023. The Company has been operating continually in the Guyana Basin for more than 2.5 decades, according to information disclosed in the joint presentation by Mr. Orlando Cabrales, CEO of Frontera Energy and Professor Suresh Narine, Executive Chairman of CGX Energy.

They said the two companies formed a joint venture with a 68/32 percent split, respectively, on the Corentyne Block. CGX Energy disclosed at the conference that it has thus far drilled four offshore wells and three onshore wells, and is in the process of drilling its 5th offshore well, the Wei-1 well, on the Corentyne Block.

Of these, CGX directly operated four of the five offshore wells and all of the onshore wells. Dr. Narine reminded the conference that all of the company’s wells were operated safely and without any spills, making CGX, after ExxonMobil, the most prolific explorer in the basin with a stellar track record of safety.

Furthermore, Professor Narine pointed out that throughout these two and a half decades, the Company has remained an active explorer, keeping its Guyanese workforce intact even during the 2014 to 2020 period when oil prices decreased significantly.

A few years ago, the Government of Guyana has indicated that it was somewhat concerned about the timeliness of some of CGX’s work commitments. CGX’s Executive Chairman disclosed that the company had invested nearly US$700 million in the basin together with its partners, on its exploration programme and its Berbice Deepwater Port infrastructure project.

As a comparison, ExxonMobil’s pre-production contract costs have been pegged at US460 million. Professor Narine also spent some time explaining that small independent companies like CGX will struggle with capitalization from time to time, given that they have no production and spend significant sums of money on their exploration programs. The Professor explained that given the length of time that CGX has been exploring the basin, the significant sums expended and the commitment that the Company has made to the country through its primary focus on Guyana and its transformative Corporate Social Responsibility programmes, the company has earned the description as “Guyana’s Indigenous Oil Company.”

Paul Langlois at IEC Guyana 2023

Indeed, the Professor reminded the audience that the Maritime Boundary between Guyana and Suriname is popularly referred to as the “CGX Line” given the pivotal role the company played in funding Guyana’s legal appeal process to the United Nations Law of the Sea Tribunal, which Guyana won. The company expended approximately US$10 million on behalf of Guyana.

Narine and Cabrales also disclosed that CGX had recently cleaned up its major debt, due to a farm-down transaction between CGX and Frontera, with CGX being able to remove all debt to Frontera, raise funds for its ongoing General and Administrative costs and acquire fiscal support for its share of the Wei-1 well. Narine pointed out that following this transaction, CGX holds 32% of the Corentyne Block while Frontera holds 68% of the block.

Of all the independent companies which held original Petroleum Prospecting Licences in the Guyana basin, CGX pointed out that it has retained the highest percentage Working Interest in the Corentyne Block and this is with a discovery at Kawa-1 and a carry on the Company’s next well, the Wei-1 well. CGX indicated that it had chosen to focus all of its attention on the Corentyne Block, including the current Wei-1 well and its Berbice Port infrastructure project.

It should be noted that CGX is not the only oil and gas company to miss work commitments in the past; ExxonMobil held the Stabroek Block since 1999, but didn’t drill the Liza-1 well until 2015; before this, the company had declared force majeure. Of course, since that time, ExxonMobil and its partners have had a fantastic string of discoveries, with the Stabroek Block booking reserves of more than 11 billion barrels of oil equivalent to date. CGX, in its presentation, pointed to its long history in pioneering the Guyana Basin, which eventually led to its Kawa-1 discovery in 2022.

CHANCE OF SUCCESS WITH WEI-1
Paul Langlois, Exploration Manager of CGX Energy provided a summary of the company’s geological models. Mr. Langlois indicated that before Kawa-1 was drilled, the chance of success on the Wei-1 well was pegged at 29%. After the Kawa-1 discovery, calibration of the company’s seismic to rock type correlations, and confirmation of its geological models, the CGX/Frontera JV raised the Chance of Success for Wei-1 to 56%.

Mr. Langlois’ presentation attracted a lot of attention, as the Geologist showed the manner in which depositions of sands formed reservoirs in geologic time in the various geological intervals such as the Maastrichtian, Campanian and Santonian. Mr. Langlois made the argument that in the northern section of the Corentyne Block, these reservoirs were charged by the world-class Canje shale source rock, as the hydrocarbons are only required to migrate very short distances to these reservoirs.

Furthermore, at each of the geological intervals, the Geologist showed spatially resolved images demonstrating that the Company’s Wei-1 and Kawa-1 wells are located on-trend with neighboring discoveries on the Stabroek Block and Block 58 in Suriname. Kawa-1, according to CGX’s Exploration Manager, proved that a working petroleum system exists in the northern section of the block, as “virtually every sand encountered hydrocarbons in the Kawa-1 well, over a depth of approximately 6, 000 feet.”

Langlois’ presentation also showed graphic representations of the depositional model, demonstrating that the area where the Wei-1 and Kawa-1 wells are located in the northern area of the Corentyne Block, are in the “fairway” of the Berbice canyon, acknowledged to be the main conduit which formed the reservoirs of the Guyana Basin.

Dr. Narine reminded the conference that Kawa-1 was a wildcat well, one of the deepest drilled in the basin and in an environment never before drilled – the shelf slope. The company, having drilled Kawa-1 safely in this challenging environment, pointed out that the knowledge and know-how gained in that process has resulted in Wei-1 to this date being an efficient well without any spi

President of Trent and Professors welcome first batch of Sustainable Guyana Students

lls or lost work time incidents. Although the company did not disclose this, Kaieteur News could guess from information presented that Wei-1 was about halfway drilled in terms of depth. Dr. Narine indicated that the company had deliberately retained virtually the same workforce and the same drilling rig that drilled Kawa-1, for the drilling of Wei-1. Evidently, these decisions are bearing fruit.

CGX and FEC also disclosed that the Wei-1 well is also an appraisal well, as the Joint Venture launches its Government-approved Appraisal Programme in the Corentyne block. Wei-1 will both appraise the Kawa-1 discovery as well as address its own exploration targets in the Maastrichtian, Campanian and Santonian intervals. Wei-1 therefore seeks to potentially expand the recoverable resources in the northern section of the Corentyne Block. The companies were keen to note that moving into the Appraisal phase of its programme in the Guyana Basin signals the confidence that the Joint Venture reposes in its programme following the Kawa-1 Discovery. All eyes will now be on the Wei-1 well, as success at Wei-1 will further strengthen the potential of the Guyana Basin acquiring another development and production Operator.

COMMITTMENT TO GUYANA
Cabrales and Narine both cast a spotlight in their joint presentation on the Sustainable Guyana Scholarship and Training Programme. The programme, Narine’s brainchild according to Cabrales, has up to this point expended approximately Canadian $3 million. The programme is funded jointly by CGX and Frontera, and seeks to offer scholarships for University of Guyana staff members to acquire tertiary degrees at a Master’s or Ph.D. level at Trent University in Canada. The scholars’ research must address one or more of the UN’s Sustainable Development Goals as it pertains to Guyana and the research must be located in Guyana. The programme supports the student’s tuition, airfare, accommodations and research expenditures.

Cabrales shared that the programme currently has nine students from the University of Guyana, who are all contractually required to provide service to the University of Guyana when their training is completed. Currently, there are four Ph.D. students and five MSc/MA students in the programme. Narine shared that two of the current students are expected to return to Guyana in the summer of 2023, as these students by then would have completed the requirements to have obtained a Master’s degree from Trent University.