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Oil Patch Insider
We interrupt this message ... Columbia stumbles; Firm protests PN’s coverage of Arctic claim
Timing being everything, the Colombian government must be wondering what they did to have events conspire so nastily against them.
Right on the heels of a mission to Calgary to sell the Canadian petroleum industry on Colombia’s efforts to separate itself from its nationalist-bent neighbors, the South American country was clobbered June 13 by panic selling on its stock market.
After two years of being one of the biggest gainers among global markets, the Colombian index fell 8.7 percent June 14, contributing to a 45 percent decline in three months.
It didn’t help the government’s drive to tap into leading world technology and rebuild production.
However, Mines and Energy Minister Luis Ernesto Mejia made a case for Canadian companies to take advantage of improving domestic security by becoming partners in reversing a slide in production from 750,000 barrels per day in 1999 to 530,000 bpd in 2005.
“The only way to find new reserves and maintain our double condition of being self sufficient and an exporter is to find new reserves and for that we need to have new investment from the private sector,” he said.
Colombia hopes to attract Canadian technology to its oilfields and contribute to US$1 billion in direct annual foreign investment and hike production to 700,000 b/d over the next 15 years.
In contrast to Venezuela, Bolivia and Ecuador, who have disrupted the operations of major global companies in their oilfields, Colombia has never scrapped a production contract and is now wooing foreign companies with offers of royalty incentives.
Mejia said his message to prospective investors is to look at Colombia in isolation and not pay attention to “what’s happening in other parts of the region.”
But he conceded that drug trafficking remains an overriding obstacle and is invariably linked to assassinations of government officials and attacks on infrastructure such as pipelines.
Although progress is slow towards an end to violence, Mejia noted that Colombia has Latin America’s healthiest economy, posting growth of 5 percent annually and boasting the lowest inflation rate.
Major Canadian companies with operations in Colombia are Nexen, Enbridge and Talisman Energy, while Petrobank Energy and Resources is holding an initial public offering of its Colombian subsidiary which produces 3,000 bpd and has close to 2.5 million acres under lease.
Petrobank President John Wright told reporters that Colombia is a “fantastic” place to do business.
—Gary Park
Beverly Hills firm protests PN’s coverage of Arctic claim The May 21 Oil Patch Insider carried a brief by Allen Baker titled “Unoilgas claims Arctic Ocean common area,” a reprint of which you will find on page 19 of this issue.
www.unoilgas.com is the home page for a Beverly Hills, Calif. company called United Oil and Gas Consortium Management Corp., which sent Petroleum News a press release in mid-May saying it “has claimed Exclusive Rights to the 3,000 square mile seabed within the international waters of the Arctic Ocean Common area for oil and gas resource exploration.”
We chose to report this news as part of Oil Patch Insider, which allows our writers to insert some opinion.
In this case, writer Allen Baker inserted both skepticism and humor.
United Oil and Gas Consortium’s Peter Sterling ([email protected]) disagreed with what we wrote.
Following are the points he made in his letter, and responses from the two Alaska geologists Baker received information from regarding unoilgas’ Arctic claim, as well as a comment from Baker.
The geologists are Bernard Coakley, co-chair of the Department of Geology and Geophysics at the University of Alaska Fairbanks, and Alan Bailey, staff writer for Petroleum News.
PETER STERLING: Someone had to do it. The Law of the Sea allows for mining operations in international waters.
BERNARD COAKLEY: No one has to do it. Allowing for mining operations is considerably different than claiming much of the central Arctic for the purpose.
PETER STERLING: The two “geologists” your journalist Allen Baker consulted obviously don’t know what’s happening in the Arctic.
BERNARD COAKLEY: These guys (unoilgas) know just enough to confuse the issue.
PETROLEUM NEWS: Coakley has spent much of the past 12 years researching the geology of the various ridges, plateaus and sub-basins that lie beneath the Arctic Ocean. He led the geophysics program of SCICEX, a series of unclassified cruises to the Arctic on U.S. submarines, and late last summer was co-chief in a research cruise across the Arctic Ocean by the U.S. Coast Guard icebreaker Healy.
That cruise, which crossed all of the major ocean basins and ridges, collected about 2,200 kilometers of multi-channel reflection data that reveal the stratigraphic record of the ocean. The seismic surveys used two 250-cubic-inch airguns, a 200- to 300-meter streamer and nearly 100 sonobuoy deployments.
PN staff writer Alan Bailey has a doctorate in geology. One of his main beats for Petroleum News is the Arctic.
PETER STERLING: Drilling can and has been done in the shifting Arctic ice. The summer 2004 Arctic Ocean Lomonosov drilling project successfully drilled to about 400 meters below the sea floor on the Lomonosov Ridge.
BERNARD COAKLEY: Drilling 400 meters into pelagic sediments without blowout prevention is substantially different than drilling for oil and gas. In fact, scientific drilling is a kind of anti-oil exploration. For safety reasons, they do not want to find hydrocarbons, or any kind of geo-pressured fluids or gas.
PETER STERLING: One of the more startling discoveries was rock with high total organic content in some of the sediments. Gee. Just the sort of source rock where one would find oil....
BERNARD COAKLEY: They found it (rock) there, but there is zero chance of its having been buried to sufficient depth so that it produced oil or gas. Or having migrated or resulting in any reserves. It may, if preserved in the deeper basin, be a significant source rock, but no one knows the extent of these rocks.
Comment – Correlative Azolla horizons have been recognized in the northern Atlantic. See article in Nature magazine, Volume 441, June 1, 2006.
There are good reasons for believing that the Amerasian Basin was anoxic for the first 100 million or so years it existed, but this does not exempt you from having to bury and mature the source rock to generate liquids that migrate into traps.
ALAN BAILEY: The Lomonosov Ridge does have a horizon with high organic content. However very little is known about its geology. The majority of the remaining area colored in the map accompanying the (unoilgas) press release is an area of oceanic crust where there is virtually no chance of finding oil and gas.
PETER STERLING: Little chance of finding oil in the Arctic? Again your “geologist” sources must have been hiding under a rock for the last 40 years. Within the U.S. controlled Arctic Ocean EEZ, the Minerals Management Service (MMS) has recently identified a total of 39 plays, including 24 Brookian plays, in the Beaufort and Chukchi seas planning areas. What makes the region particularly intriguing is the size of some of the structures — more than 12 of the identified structures exceed 150,000 acres in extent, thus exceeding the size of either the Prudhoe Bay or Kuparuk River fields. There are 24 identified prospects more than 100,000 acres in size and 95 more than 40,000 acres, the approximate size of the Alpine field.
The Arctic Ocean Burger field was then drilled in 1989-1990. Burger could represent the largest offshore discovery on the Alaska OCS with perhaps 7 Tcf gas and 724 Mmb condensate. “Plans to shoot seismic offshore Alaska’s Arctic are already picking up speed. Shell, ConocoPhillips and Houston-based GX Technology Corp. all plan to shoot seismic this summer in the Chukchi Sea, ahead of the MMS Chukchi lease sale planned for 2007.”
ALLEN BAKER: Looks like he’s done a little reading on Alaska, but I’m skeptical when someone uses acreage as some measure for the size of an oil accumulation. One has nothing to do with the other.
BERNARD COAKLEY: His “claim” covers areas that have never been explored and cannot be while there is substantial ice. All of the areas he cites are on land and the continental shelves — well within areas contained in the present EEZs of Russia and the United States.
ALAN BAILEY: Peter Sterling is correct about areas such as Beaufortian Sea and the Chukchi Sea. But these are NOT international waters — they are part of the economic exclusion zone of the United States. I think that almost all of the areas of continental shelf where oil and gas potential is high fall within some country’s economic exclusion zone. There may be some areas of dispute, but adjoining countries will certainly claim these if they turn out to be extensions of the continental shelf. Canada, for example, has ambitions to claim at least some of the Lomonosov Ridge.
BERNARD COAKLEY: So does Denmark.
PETER STERLING: Meanwhile on the Russian side of the Arctic Ocean: The Giant Shtokman gas and oil field is an early indicator of the potential for energy within Russia’s Arctic Shelf territory. The Shtokman gas condensate deposit lies in the Barents Sea, in the north of Russia in the greater Arctic Ocean. Reserves of gas have been put at 3.2 trillion m3, with another 31 million tonnes of condensate.
Perhaps this is just an invention of the mind but to the casual observer this sure looks like commercial hydrocarbons in the Arctic.
BERNARD COAKLEY: Again on the shelf in the Russian EEZ.
ALAN BAILEY: The perimeter of the Arctic Ocean contains very broad expanses of continental shelf — proportionally larger areas of continental shelf than the Earth’s other oceans. These areas of continental shelf are prospective for petroleum and they may contain vast quantities of oil and gas. However, virtually all of the areas of continental shelf come under the jurisdiction of one or more of the countries that border the ocean.
PETER STERLING: Prudhoe was once a speculative possibility.
BERNARD COAKLEY: So was mantle-derived natural gas (e.g. Tommy Gold). Prudhoe Bay was also associated with known oil seeps. It was, for a variety of reasons, truly prospective and producible with existing (mostly) technology.
PETER STERLING: (in defense of his company’s location) Beverly Hills has nicer weather than Anchorage 350 days of the year. The airport is always open and it’s close to where the majority of the consumers are. One thing is for sure, time will tell if commercially viable hydrocarbons can be located and developed in the Central Arctic
BERNARD COAKLEY: Wishful thinking should not be confused with geologic information. Much of the central Arctic Ocean is underlain by oceanic crust. Most of the areas are also quite deep (>3000 meters). This oil, if it exists in commercial quantities, would be quite challenging to find, explore and produce. No one would put up the money until something similar was found elsewhere.
That said, there could be something viable in the areas that are likely to be claimed under Article 76 of the Law of the Sea, particularly the Chukchi Borderland or the Siberian slope. The deep ocean is, as far as we understand at the moment, wishful thinking.
PETER STERLING: It may be sooner than you think.
BERNARD COAKLEY: Anything would be sooner than never. This could be a very nice gift for his great-great grandchildren, but I doubt it.
ALAN BAILEY ON NEW YORK TIMES ARTICLE: I looked at the story the New York Times recently published about the Arctic’s oil and gas potential. The idea that the discovery of an azolla horizon on the Lomonosov Ridge indicates the potential for “vast” oil resources, as stated in that story, seems hyperbole, to say the least. For starters, azolla is a freshwater plant and oil is generally generated from marine organisms. And then there’s the issue that Bernard Coakley raises about the lack of sufficient heat to generate oil or thermogenic gas. I imagine it’s possible that there’s some biogenic gas in the ridge, but nobody knows that. An MMS geologist familiar with Arctic Ocean geology has told me the azolla horizon on the Lomonosov Ridge MAY extend into the Tertiary of the continental shelf around the perimeter of the Arctic Ocean, and could form a petroleum source rock there. But that is complete speculation at the moment.
BERNARD COAKLEY ON 3,000 SQUARE MILE CLAIM: Unoilgas said it “has claimed Exclusive Rights to the 3,000-square-mile seabed within the internation
Editor’s note: Email addresses for the individuals quoted above are as follows: Bernard Coakley ([email protected]); Peter Sterling ([email protected]); Allen Baker ([email protected]); Alan Bailey ([email protected]).
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