Predator has a 75% interest in the Guercif Licence together with its partner ONHYM, the State oil company.
The Guercif Licence (“Guercif”) is located onshore Morocco and comprises four Exploration Permits, I, II, III and IV. It covers an area of 7,269 km² and lies approximately 250 kilometres due east of and on trend with the Rharb Basin where shallow gas production has been established by SDX Energy Plc for several years. Guercif also lies approximately 180 kilometres due north-west of Tendrara where deep discovered gas is currently being appraised and potentially developed by Sound Energy Plc.
Licence Terms and Work Programme
The Licence equity holders are Predator Gas Ventures Ltd., a wholly-owned subsidiary of Predator, 75% (operator) and ONHYM, the State oil company, 25%. ONHYM is carried through exploration but funds its pro-rata share of all costs upon a Declaration of Commerciality.
The Licence is for 8 years and is split into an Initial Period of 30 months; a First Extension Period of 36 months duration; and a Second Extension Period also of 30 months. After each Licence Period there is an opportunity to withdraw from the Licence without entering the next Licence Period.
In the Initial Period, the work programme comprises 250 kilometres of 2D seismic reprocessing and AVO analysis and the drilling of one well to a minimum depth of 2,000 metres. Desk-top geological and gas marketing studies will also be carried out. Seismic reprocessing costs are estimated to be US$150,000 and well costs US$2,000,000.
The fiscal terms in Morocco are restricted to a 5% State royalty for gas, applicable after the first 10.6 BCF of net production to the operator, and corporation tax charged at 31%. However, there is a 10-year “holiday” before corporation tax will be charged and any unused tax losses can be offset against the tax due. There are no signature bonuses but production bonuses in the form of cash payments exist with a maximum one-off payment of US$5,000,000 on production greater than 30,000 BOE/day. A discovery bonus of US$1,000,000 is also payable.
Gas prices in Morocco are currently higher than UK National Balancing Point (NPB) prices for domestic delivery. Any future gas exports will be priced at NPB prices.
Guercif has been very lightly explored with only 4 deep exploration wells drilled by Elf in 1972 (GRF-1), Phillips in 1979 (TAF-1X), ONAREP (the forerunner of ONHYM) in 1985 and 1986 (MSD-1 and KDH-1) and 2 shallow stratigraphic wells drilled by BRPM for coal exploration in the 1950’s.
TransAtlantic re-entered, logged and tested the MSD-1 well, originally drilled in 1985, in 2008 but the logging and testing failed to establish the presence of hydrocarbons in the Jurassic.
The seismic inventory includes 3,291 kilometres of 2D seismic data acquired between 1968 and 2003 (including a new 300-kilometre ONAREP 2D seismic survey acquired in 2003), which were reprocessed in 2006 by TransAtlantic when Pre-Stack Time Migration was applied for the first time to the entire seismic inventory. TransAtlantic also acquired an aeromagnetic and aerogravity survey in 2006 comprising 10,000 line kilometres.
Historical exploration focus was entirely on the Jurassic and was completed before the shift in focus took place that resulted in shallow (Tertiary) gas production in the Rharb Basin and successful deep (Triassic) gas appraisal drilling at Tendrara.
In this context, therefore, Guercif has never been explored for these more recent targets and this is the new focus for Predator Gas Ventures Ltd. (“PGV”).
Predator has re-evaluated the existing reprocessed 2D seismic database and well data and has identified the Moulouya Prospect as being drill-ready. The Moulouya Prospect covers at least 40 km² and is supported by multiple seismic amplitude anomalies.
An off-set well, GRF-1 drilled in 1972 before the acquisition of the 2003 ONAREP seismic, less than 1.5 kilometres to the south-east of the edge of the seismic amplitude anomaly, had dry gas shows in some high quality Tortonian (Miocene) reservoir sands. The same reservoir sands are exposed at the margin of the Guercif Basin where they are interpreted as deep water turbidites and form thick, stacked multiple sand bodies.
The gas potential of the area is further enhanced by the recognition of TransAtlantic of up to 128 feet of untested gas pay at the base of the Miocene in GRF-1 with average porosities of 20% and average gas saturation of 20%. Two micro-seepage surveys carried out for TransAtlantic by Geo-Microbial Technologies in 2006 and 2007 also identified dry gas around the GRF-1 well in soil samples.
The Directors believe that the Moulouya Prospect therefore represents a low risk proven gas play that is a potentially play-opening, opportunity for shallow gas in multiple, high quality reservoirs at depths in the range 2,000 to 5,000 feet. Significantly the potential for a very large accumulation exists due to the lack of compartmentalisation of the mapped seismic anomaly – unlike the situation in the producing Rharb Basin where the structures are small but with a very high success rate for finding gas.
The Moulouya Prospect lies just 9 kilometres from the Maghreb gas pipeline where significant spare capacity exists for the transport of gas either for domestic use or for export to the European Union.
Approximately 90% of Morocco’s hydrocarbons are imported from Algeria but in 2021 ownership of the Maghreb Pipeline will pass to Morocco.
Small volumes of gas can be utilised in the domestic gas market but larger volumes require gas-to-power and export options. The potential to get gas to market with ease exists and the Government is supportive and aligned commercially and strategically with the other licence partners and has a desire to keep gas in-country.
The reservoirs potentially developed in the Moulouya Prospect have the potential to generate good well deliverability without any stimulation whatsoever based on the production history for similar shallow reservoirs in the Rharb Basin. Field production rates for a successful field development are expected to be high and therefore production costs per unit volume produced are anticipated to be correspondingly low. Capital development costs are expected to be very low given the shallow drilling depths, high recoveries per well based on potentially contiguous reservoir sands (thereby reducing the number of development wells), anticipated quality of the dry gas (reducing complex processing requirements), and proximity to the Maghreb Pipeline.
The Directors believe that a successful gas discovery well potentially creates the opportunity for a fast-tracked, uncomplicated gas development.
Predator believes that the Moulouya Prospect is drill-ready and warrants a fast-tracked approach to drilling in order to capitalise upon its attractive valuation metrics and the ability to accelerate a gas development in the case of a gas discovery to exploit the current demand for gas in Morocco and, in a wider context, Europe.
The next six months will, therefore, be spent on desk-top studies by management to develop and finalise the drilling programme and to carry out an Environmental Impact Study. Discussions with rig owners will progress further with the objective of seeking a suitable rig to drill the Moulouya Prospect in the late third or fourth quarter of 2019. The well is not anticipated at present to take longer than 15 – 20 days to drill, subject to finalising the drilling programme.