Discovery at Kawa-1

CGX and Frontera have become the first companies to find hydrocarbons in commercial quantities outside the Stabroek block in Guyana’s offshore zone

WHAT: Two Canadian firms have made a find in Kawa-1, a well at the Corentyne block.

WHY: Kawa-1 is Guyana’s first commercial discovery outside Stabroek.

WHAT NEXT: The partners may seek to team up with another investor before launching development operations.

Until earlier this week, Guyana’s upstream oil sector had only one real large-scale success story to report – that of the Stabroek block, operated by the US super-major ExxonMobil and its partners Hess, a US- based independent, and state-controlled China National Offshore Oil Corp (CNOOC).

True, Stabroek is a success on a very large scale indeed. The block is home to more than 20 confirmed discoveries that hold at least 10bn barrels of oil equivalent (boe) in recoverable reserves, and the partners have yet to wrap up exploration. It may yield as much as 1mn barrels per day (bpd) of light sweet crude oil before the end of the decade, and ExxonMobil has agreed to make associated gas from the field available for power generation in Guyana, where electricity supplies are far from adequate.

Other international oil companies (IOCs) have tried to replicate ExxonMobil’s success in Guyana, but so far to no avail. Canada’s Eco (Atlantic) Oil & Gas found oil in the Jethro and Joe sections of the Orinduik block in 2019, but the sites appear to contain heavy, high-sulphur crude that is far less valuable than the light sweet variety in Stabroek’s fields. Repsol (Spain) and its partners in the Kanuku block revealed in early 2020 that they had found non-commercial quantities of crude oil in Carapa-1 and are hoping for better results from their next well, Beebei-Potaro-1.

Even ExxonMobil has not been able to repeat its own performance at Stabroek. It found only non-commercial quantities of oil in the Tanager-1 well at the Kaieteur block and has not yet said whether it will sink a second exploration shaft. And at Canje, it struck out three times in a row, making no discoveries at Bulletwood-1, Jabillo-1 or Sapote-1.

Announcement on Kawa-1

That changed on February 1, when Frontera Energy and CGX Energy, the Canadian companies that have teamed up to explore the Corentyne block, reported a find at Kawa-1.

In a statement, the companies said that the wildcat exploration well had “encountered approximately 177 feet (54 metres) of hydrocarbon-bearing reservoirs within Maastrichtian, Campanian and Santonian horizons, based on initial evaluation of logging while drilling (LWD) data.” They noted that the well had been drilled in the northern section of the block, not far from sections of two areas where commercial oil reserves have been discovered – namely, the eastern end of the Stabroek block and the western central section of Block 58 offshore Suriname.

According to the statement, many of the hydrocarbon shows encountered at Kawa-1 “are similar in age and can be correlated using regional seismic data” with the finds at Stabroek and Block 58. However, some demonstrate the presence of hydrocarbon-bearing sands at greater depths, including Coniacian horizons or even older, and thus have the potential to open up new opportunities.

Frontera drilled Kawa-1 to a depth of 6,578 metres after spudding the well in 355-metre-deep water on August 22, 2021. It had been targeting the “easternmost Campanian and Santonian channel/lobe complex on the northern section of the Corentyne block,” the statement noted.

Excitement and assessment

So far, CGX and Frontera have not yet speculated publicly about the size of their discovery. However, they have expressed excitement about this development.

Gabriel de Alba, the chairman of Frontera’s board of directors and co-chairman of CGX’s board of directors, called the find a “potentially transformational opportunity” and waxed enthusiastic about “the growing success story unfolding in offshore Guyana.” (Frontera and CGX are deeply intertwined. The former company is the majority shareholder in the latter, while equity in the Corentyne project is split 66.67% to the latter and 33.33% to the former.)

Frontera and CGX went on to say that they were working to confirm the net pay and fluid properties of hydrocarbon reserves in the shallow and deep layers of Kawa-1 with electric wireline logging and fluid sampling and would reveal the results of the drilling programme “as soon as practicable.” Additionally, they indicated that they expected to wrap up drilling by the end of this month and would be able to finalise their estimate for the cost of the well once they had reached this milestone.

In the meantime, the companies appear set on making a more thorough assessment of the northern section of their licence area. In the statement, they reported that they were set to spud their second exploration well, in line with the requirements of their contract, at a nearby site in the second half of 2022. This site, known as Wei-1, will “target Campanian and Santonian-aged stacked channels in the western fan complex in the northern section of the Corentyne block.” They also said they would use the Maersk Discoverer semi-submersible rig, the same unit that drilled Kawa-1, to sink Wei-1.

New partner needed?

As of press time, neither CGX nor Frontera had spoken publicly about what might happen after Wei-1 is complete. However, Andres Armijos, the head of Latin America research at Houston-based Welligence Energy Analytics, believes that the Canadian companies may start looking for another partner further down the road, assuming that the results of their drilling programme remain positive.

“It’s too early to make a definitive judgement, but given that Kawa lies within a prolific fairway of discoveries, the early signs are good,” he told NewsBase. “However, CGX and Frontera will want to prove up more resource before making any development decisions. We also think it likely they’ll try to bring on a partner prior to any development. Doing so enables them to a) realise some early value from the block, b) reduce future capital commitments and c) potentially bring in a company with experience developing offshore projects.”

Armijos did not identify any potential partners, but he said that CGX and Frontera might be able to launch production at Corentyne relatively quickly. “Given the water depths, we’d anticipate full-scale production starting in four to five years after commerciality is established,” he commented.”

Additionally, he said that the success at Kawa-1 had the potential to attract more IOCs to Guyana’s next licensing round, which is scheduled to kick off later this year. “Yes, it is likely to increase interest in the round,” he told NewsBase.