Since it first opened its doors in 2004 Baar, Switzerland based Manas Petroleum has assembled a well-diversified portfolio of high impact exploration plays spanning two continents and five countries. It includes agreements on and varying interests in over five million acres in Central Asia and Eastern Europe. Only a week ago Manas added to its stable of high impact projects when it was awarded an exploration license in the Magellan basin in Southern Chile – an area that is rapidly becoming one of South America’s oil and gas exploration hot-spots. The company has recruited Mr. Ricardo Ponce for that project. Mr. Ponce used to be the General Manager of world wide exploration for Chilean state owned Sipetrol. That was when Sipetrol wisely farmed into Apache’s now spectacularly successful El Diyur, Egypt gas play. This time Apache is not a partner but a neighbor in the Magellan, a region the company says reminds them (in their Q1 confernece call) of Egypt’s early days.
While Chile is Manas Petroleum’s latest project, the company’s first project was its Kyrgyz Republic Fergana basin oil exploration play. It was a natural beginning for the company as Manas CEO Dr. Alexander Becker received his PhD in structural geology at Kyrgyz Republic’s Frunze Academy of Science (Bishkek) after which he quickly set about discovering two oil fields and was subsequently named by the Soviets, the area’s top mapping geologist. After a stint as an award winning researcher at Israel’s Ben Gurion University he got back to the business of finding oil. Manas Petroleum is the result. It is clear that Dr. Becker’s knowledge of the region’s bureaucracy, politics and geology has been more than a little help in assembling the now world-class Kyrgyz project. In 2006 UK based engineers Scott Pickford estimated that part of Manas Petroleum’s Kyrgyz Fergana holdings had a P50 an in place resource of 1.2 billion barrels of light oil – an estimate the company is confident will be significantly upgraded.
Overall strategy
Those licenses have since been farmed out to Australian major Santos leaving Manas with a 25 percent interest, 20 percent of which is carried until production. “Kyrgyz is a good example of our overall strategy” says Manas Director of Business Development Neil Maedel as he points out that the company is working to close a similar deal for the company’s neighboring Tajik license and that other large projects with accompanying farm-outs “are certainly part of the strategy”. That the company’s Central Asian portfolio looks exceptional is clear. But what is generating the most excitement, as Dr. Becker pointed out in a recent interview, is Manas Petroleum’s oil and gas Production Sharing Contracts which cover over 3,000 square kilometers in Albania.
Albania has been known for its oil for a very long time. Almost 2000 years ago the Romans mined bitumen, an oil product, in Southwestern Albania. Albania’s first oil well was drilled in 1918. But it was not until the late 1920s when intensive drilling by companies including Standard Oil and the Anglo Persian Oil Company (now British Petroleum) led to the discovery and development of shallow fields near known tar sands and bitumen occurrences. Albania’s Patos Marinza is among them. It was discovered in 1932 and still has approximately 2 billion barrels of oil in place, making it Europe’s largest onshore oil field.
In the 1960s the use of seismic with the help of Chinese partners led to the discovery of deeper fields that instead of heavy oxidized high sulfur crude contained light crude oil. But the ultra-Stalinist regime of Enver Hohxa was anything but good for the country’s development – the oil and gas sector included. And as even the Soviets grew somewhat moderate, an increasingly paranoid Hohxa government spent most of its energy preparing for an invasion that never came. By the 1980s the regime had built more than 700,000 concrete bunkers for its 3.5 million people.
Hohxa died in 1985 and as the Soviet Union was collapsing in the late 1980s so did the dysfunctional Hohxa government. In 1990 after more than a half century of isolation, the first Albanian offshore licensing round was opened. It was followed in 1992 by the country’s first onshore round which was won by a French company called Coparex, a Croatian company called INA Naftaplin (reputed to have supplied half of Croatia’s oil over the past 50 years) and Shell.
Analyse this
Shell and Coparex subsequently spent a combined $25 million to acquire, analyze and reprocess approximately 4,000 km of seismic. In doing so they discovered a deep under-thrust structure which by their calculations had the potential to hold a combined 820 million barrels of recoverable light oil.
Shell and Coparex’s combined calculations showed a potential for 820 million barrels of recoverable light oil. The two companies’ seismic imaging revealed that the same thrust sheet which holds all of Albania’s oil reserves plunged to a depth of around 4 kilometers to form a giant sub-thrusted anticline under their licenses. Gustavson Associates, a global mining and petroleum engineering firm summarized what subsequently happened by saying:
“Shell and Coparex suspended all exploration activity and abandoned the blocks in reaction to extreme unrest in Albania and conflict in neighboring Kosovo, allowing Manas to later acquire these superbly defined, giant, virtually drill ready prospects.”
Since then much has changed for the better. Albanian diaspora, which work mostly in the EU and the US, remit over a billion dollars annually back to the country’s economy, while the EU also works to rebuild Albania, all with a profoundly positive effect on its small population. The Southeast European Times recently said “Albania has become a construction site” while last year the Economist magazine published an article entitled “Good Times at last” which praised the country’s performance. The IMF said in its latest quarterly review that Albania had met all targets set by the institution, while ratings agency Moody’s gave the country a B1 grade – its first ever – putting it at the same level as Jamaica and the Ukraine. Albania is expected to join NATO next year, although EU membership still looks a ways off.
Negotiations
In 2005, Occidental Petroleum made a light oil discovery in Albania, approximately 50 kilometers south of the Manas blocks. This occurred just as Manas was initiating its efforts to negotiate Production Sharing Contracts with the Albanian government.
The discovery dramatically reduced the exploration risks associated with the Tirana sub thrust anticline that was discovered by Shell and Coparex because it further confirmed that it was the oil-saturated Ionian thrust sheet. Gustavson describes the discovery as having “substantially reduced exploration risks” as it “greatly increases the probability that the giant anticline outlined by Shell and Coparex seismic is in fact the oil saturated Ionian formation”. In its conclusion in a subsequent discussion on the risks and probability of success for all of the Manas Albanian prospects Gustavson says: “The probability of success for a wildcat well in a structurally complex area such as this is relatively high due to the fact that it is in a structurally favorable area, there exists a proven hydrocarbon source and analogous production exists only 20 to 30 kilometers away”.
The Albanian project is the brainchild of Manas Chairman Heinz Juergen Scholz. Mr Scholz is a Physicist, Engineer and automation expert who built hi-tech factories and telecommunication networks in the Former Soviet Union. He advised Soviet Ministries regarding the sale of Russia’s East German telecommunication network following the Soviet Union’s collapse and has collaborated his research with scientific institutes in the Russian Federation. Mr Scholz knows his way around the Former Soviet Union and its satellite countries and it is Mr Scholz that played a major role in negotiating the company’s Albanian PSC’s. And notably, as success appeared increasingly certain, he also began recruiting the region’s top geological talent.
They include Dr. Agim Mesonjesi who is a PhD petroleum geologist and was part of Occidental’s original Albanian exploration team. Dr. Vilson Bare has also joined Manas – he is an expert geophysicist who received his Doctorate from the Tirana University (for his thesis on the “Study of diffraction in seismic section and its uses in geological interpretation). Professor Selam Meço (paleontology, University of Tirana) is also assisting in the project. Another exceptional player to be involved is UK based reservoir engineer Chris Pitman. Mr Pitman is also the Managing Director of Energy Advisors Limited and a former advisor to BNP Paribas (Paris) and the Abu Dhabi Investment Company.
Expert in the field
The Albanian team played a vital role together with Ukrainian geologist Yaroslav Bandurak (Manas Petroleum’s head geologist) to merge and refine the Shell, Coparex and state oil company Albpetrol previous work. Their data sets were combined for the first time and together with the formidable geological talents brought to bear by the group, resulted in a huge improvement on what Gustavson has already referred to as (Shell & Coparex’s) “superbly defined virtually drill ready exploration targets”.
The Manas team results defined and discovered a total of eight giant prospects which according to Gustavson calculations have the (P10) capacity to hold up to 5 billion barrels of light oil and 5 trillion cubic feet of natural gas if the prospects are oil filled.
If they contain oil with a gas cap the amount of recoverable oil drops to a still breath-taking 2.4 billion barrels of oil with 26 trillion cubic feet (Tcf) of gas. If mainly gas, the P10 amount recoverable is 46 Tcf an amount that would make it Europe’s largest field outside of Russia. These amounts are the headline best case volumes. Gustavson puts the most likely volume (P50) if principally oil at 2.98 billion barrels with 3 Tcf of gas.
Estimations
If oil with a gas cap the amounts are 1.4 billion Bbls of oil and 15 Tcf of gas and if just gas the P50 is 28 Tcf. The lowest case estimate for the prospects if oil filled, oil and gas or just gas is a respective 1.636 billion barrels, 738 million barrels with 8Tcf of gas and 16 Tcf of gas. Critically any of the above would make Manas a major oil and gas company.
No matter how good the Albanian project might be, however, Dr. Becker is quick to emphasize, that there are unknowns and with exploration there is always potential for disappointment. We know the prospects’ reservoir capacity is very large and that there is oil in the system. “But we will never really know for sure if some unexpected geological event has intervened”. This we will not know until the prospects are drilled”.
We can reduce the impact of these risks. The only way around this is to diversify our geological (and political risks). “We already have very high quality high impact plays in five countries”, Dr. Becker reminds us. “And in the next six months our goal is to add several more to what think is already an all-star list.”
Staggering figures
Currently, independent engineering reports give the company a P50 oil resources of just over 4 billion barrels. “That does not include Tajikistan or any other new ventures which have yet to be independently assessed – giving substantial room for growth.” says Manas Director Neil Maedel. “To see the direction we hope our strategy will take us” he advises, “divide the number of shares Manas has outstanding into the independently engineered resources (which to be conservative we will use 3 billion barrels) which we already have. The number is around 26 barrels per share. Divide it into our share price and you will get around $0.16 per barrel. In comparison North Sea proven reserves sell for about $20 per barrel. Somewhere in between is the exploration and development potential. Best yet is that we are getting other companies to take on most of the risks and pay the bills. We may end up with less of a project but we also get to play safe and smart by spreading our risks among many great high potential projects. And that is how we plan to build a large oil exploration company”.
