Guyana is located on the northern coast of South America between Venezuela and Suriname. Its oil and gas industry is in a very early stage of development. With an active hydrocarbon system and extremely favorable fiscal terms, several world-class E&P companies are involved in the country, including Exxon, Repsol, and Tullow, and CGX Energy. Fiscal terms in Guyana are based on a production sharing contract model. The model offers one of the highest "contractor take" percentages found worldwide with cost recovery of up to 75% and no royalties or taxes.
Operations : Guyana
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| Basin | Takutu |
|---|---|
| Gross Acres | 1.85mm |
| Canacol Working Interest | 65% |
| Operator | Groundstar Resources |
History
In May 2008, Canacol negotiated a farm-in with Groundstar Resources Ltd. ("Groundstar) located in the Takutu Basin, onshore Guyana adjacent to the border with Brazil. The block lies 200 kilometers to the south of Georgetown, Guyana's capital, within the southwest-northeast oriented Takutu Basin.
Recently, the operator was successful in extending the term of the contract to July 2012 with a commitment to drill 2 wells by May 2011. The block contains the Karanambo discovery made by Home Oil in 1982. The Karanambo 1 well tested 411 barrels of oil equivalent production per day (42 degree API) from a sub-salt reservoir during a drill stem test proving the existence of a light oil hydrocarbon system within this frontier basin. Based on a report prepared by Gaffney, Cline & Associates dated December 2009, the mean risked recoverable prospective resources associated with the Karanambo discovery are 128 million barrels gross (83 million barrels net). The block also contains 2 exploration prospects, Pirara and Rewa High, with mean prospective resources of 133 million barrels (86 million barrels net) in Pirara and 169 million barrels gross (110 million barrels net) in Rewa High.
Under the terms of the farm-in agreement, Canacol was required to fund the first US$12 million of costs in order to earn a 55% working interest in the contract. In May 2009, the Corporation announced that it had entered into a Share Purchase Agreement to acquire 35% of Groundstar's 45% remaining working interest in the exploration contract for consideration of US$3.45 million. This transaction closed in October 2009 increasing Canacol's working interest to 90% and eliminating the farm-in earning requirement.
In November 2009, the Corporation completed a farm-out agreement with Sagres Energy Inc ("Sagres") whereby Sagres acquired a 25% interest in the exploration agreement by agreeing to fund 30% (US$1.25 million) of costs of drilling the K-2 exploration well, bringing the Corporation's net working interest to 65%. Under the terms of the agreement, the Corporation and Sagres will carry Groundstar's 10% remaining working interest until first commercial oil production.
Recent Activity & Outlook
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Canacol and its joint venture operator, Groundstar Resources Ltd., have signed an agreement for a drilling rig and associated services. The bottom hole location for the K-2 well will be approximately 400 meters northwest of the Karanambo 1 discovery well, and will target the same productive reservoirs that tested 411 barrels of production per day of 42 degree API gravity oil in 1982.
The joint venture to date has completed construction of the drilling pad, access roads, and staging areas in preparation of drilling, and has purchased and mobilized tubulars and wellheads sufficient to drill 3 wells, which are now in country and on location. The well is anticipated to spud in late August 2010 and is anticipated to take 50 days to drill and test, and if successful will be put on a long term production test to establish the deliverability and performance of the reservoir. The approximate cost of drilling the K-2 well net to Canacol is US$6 million, and upon completion of drilling operations operatorship will be transferred from Groundstar to Canacol.