Exxoteq to drill Eastern Cape oil well

<a href=www.busrep.co.za>IOL Business report June 4, 2003 By Edward West

Cape Town - Exxoteq, the local subsidiary of international group Exxoteq Corporation, was planning to drill an oil well near Port Elizabeth in the second half of next year as new technology had made the exploitation of this country's oil reserves viable.

Exxoteq was also planning to list on the JSE Securities Exchange, possibly by August, according to Gerhard Brink, the managing director-elect of Exxoteq and previously a Soekor geologist.

It will be one of only two listed oil explorers on the JSE, the other being Energy Africa.

Brink, whose qualifications include 20 years as a petroleum geologist and seismic specialist as well as being a "proven oil finder" in Chile, Venezuela, New Zealand, Pakistan, Egypt and South Africa, said there was no oil-bearing rock in 99 percent of South Africa, but there was oil under the remaining 1 percent.

In 1967 Soekor drilled test well CO 167 north of Port Elizabeth, in the Algoa Basin. As with many onshore tests the results confirmed oil below the surface, but its economic viability could not be confirmed.

"Some of the wells Soekor sank showed oil traces. Soekor processed a test case gallon and it was good quality. Now we are taking the old data and blending it with new technology so we can accurately establish which of the wells hold economic promise," Brink said.

Frank Brown, a retired professor and consultant working with the University of Texas, had developed exploration models for potential oil deposits on the Texas and Gulf of Mexico coastlines. The areas are similar to the Algoa Basin.

On reanalysing the old data from Soekor, Brown wrote: "The information definitely indicates the prospective petroleum potential of the Algoa Basin, especially now that remarkable advances in sequence stratigraphy and petroleum systems have been made since wells were last drilled .

"Re-evaluations of mature and 'dry' basins in the US have had considerable success using newer concepts and technology." Brink said the Algoa Basin wells would probably all be marginal, including the one to which Exxoteq had the rights.

"Marginal means anything under 50 million barrels. That is the accepted minimum level that excites most major producers. Below it their heavy overhead costs make production unviable. Mid-size oil companies are exploiting fields with as little as 5 million to 7 million barrels. Even at this level they yields revenue in excess of $100 million," said Brink.

Brink said Exxoteq would also focus on exploration off the west Africa coast.

"Our international holding company, Exxoteq Corporation, uses what it calls a Floating Production Storage and Offloading (FPSO) system.

"It was developed to reduce costs on marginal fields. In simple terms it keeps the recovered oil in a storage facility close to the rig, separates out the water and other residues, then pumps it straight to awaiting tankers.

It was currently being used by PetroSA, "but we have the rights to use the system throughout sub-Saharan Africa".

"We are currently finalising discussions with a few west African governments to buy the rights to marginal oilfields, and the officials involved are aware that the FPSO system makes our bids viable," said Brink.