CHRYSAOR CNS LIMITED Relinquishment Report for Licence P 1977 UKCS Blocks 8/27, 8/28, 14/5, 14/10, 15/1, 15/2, 15/3, 15/6, 15/7 and 15/8
1. Licence Information During 2012 Chrysaor CNS Limited applied for a Traditional Seaward Production Licence over UKCS Blocks 8/27, 8/28, 14/5, 14/10, 15/1, 15/2, 15/3, 15/6, 15/7 and 15/8 covering part of the sparsely drilled Dutch Bank Basin. This was a 27 th Round Award Traditional Licence which had an effective start date 1/1/13 and an initial area extending to 2033.80 km 2. The First Term was for 4 years ending on 31 st December 2016 and with a minimum 50% relinquishment required at that point. 2. Licence Synopsis P1977 was awarded to Chrysaor CNS Limited (100%). Chrysaor was operator of P1977 and acquired the neighbouring P2146 from CGG in order to fully investigate leads which straddled the common boundary between the two Licences. (P2146 became a Chrysaor operated 100% owned licence also). The main prospectivity identified within both licence areas was a shallow gas lead, subsequently named as Selene, of Beauly age or equivalent and postulated to be a stratigraphic pinchout of a high net to gross package of Beauly sands onto a local high. The expected reservoir units were thought to be sealed and sourced by the enveloping Beauly and Dornoch coal and lignite units. The hydrocarbon charge was thought to be biogenic gas derived from microbial digestion of the organic matter contained within these coal units. These units being buried at such depths and currently at such temperatures as to permit, perhaps even favour bacterial metabolism. The identification of this lead was suggested by what appeared to be a flat spot, or DHI, identified via interpretation of the legacy 2D seismic dataset. This flat spot was postulated to be a Gas Water Contact (GWC) as it appeared to conform to structure and did not appear to cut across the lignite or coal horizons which were visible on the available seismic dataset. A further support to this hypothesis was that the amplitude response at this location appeared to be absent in the downdip Skipper heavy oil discovery. There was some wash-out, or weakening of seismic amplitudes seen immediately below the lead. This was viewed as being consistent with an accumulation of gas within the Beauly sands as was the apparent phase reversal seen at the south-eastern edge of the prospect. The P1977 Dutch Bank Basin Licence has now been relinquished by Chrysaor due to a lack of perceived prospectivity within the licence area. Relinquishment Report Licence P1977 January 2017 Page 2
3. Work Program Summary Firm commitment The Licensee shall : (a) Obtain 2000km of 2D seismic data (now completed), and (b) Reprocess 400km of 2D seismic data. Drill-or-drop Chrysaor CNS Limited proposed to: (a) Drill one well to 2135m or 15m below the Base Jurassic, whichever is the shallower, or: (b) Elect to allow the licence to automatically cease and determine pursuant to Clauses 3 and 6. 4. Database Chrysaor purchased over 2000 line km of 2D seismic over the East Shetland Platform, which have been used to refine the area being applied for as a 4-Year Traditional Production Licence, and approximately 500 km 2 on the licence of released 3D data coloured in purple and green shades on the map below. Figure 1 Seismic Data Coverage and Well Control for main relevant part of Dutch Bank Basin Well log and report packages for all relevant wells (16 in all) were acquired in connection with this application, in addition to our existing extensive well database. Relinquishment Report Licence P1977 January 2017 Page 3
As a true Frontier area well coverage is extremely sparse with only 7 wells drilled within the 10 block area being applied for (approx. 2150 km 2 ). Well number Date TD (ft) TD (m) Results Comments 7/16-1 1997 6813 2077 P&A Dry 8/15-1 1984 5000 1524 P&A Oil Shows Tight Triassic stratigraphy at surface and TD in tight Devonian. Drilled as the initial test of a stratigraphic/structural trends proven by 9/11-4 (5 Km to the east). 38 ft heavy oil pay in the Palaeocene, TD in Devonian no Triassic or Jurassic sections preserved. 8/15-2a 2008 4770 1454 P&A Dry 8/20-1 2001 5381 1640 P&A Dry 8/27a-1 1974 7340 2237 P&A Dry Sailor Prospect ~3km west of the Mariner Filed. Primary Maureen Sandstone present and good quality however water wet. Seal integrity issues, many sands present above target. Drilled on the Shetland Platform outside the Dutch Bank Basin. Early Tertiary target (Maureen Fm) no shows encountered. Drilled in the Dutch Bank Basin. 125 ft KCF seal above a 230 ft Jurassic water wet Sand with no shows present. 8/30-1 & 1Z 1984 6407 1953 P&A Dry Drilled on the Fladen Ground Spur with the Primary intention of testing Palaeocene four-way dip closure traps. Not strictly relevant to the Dutch Bank Basin Play, however the thin Jurassic Sand interpreted is promising for more section down dip in the basin. 9/21-2 1981 8027 2447 P&A Oil shows Drilled on the Shetland Platform outside the Dutch Bank Basin. Maureen Fm pinch out primary target. Of interest ~ 16 KCF is an indication of good seal present across the Dutch Bank Basin down dip to the south west. 14/2-1 1986 5137 1566 P&A Dry Western shoulder of the Dutch Bank Basin with the intention of testing pre- Zechstein Sands were water bearing and no Jurassic Sand Present. Relinquishment Report Licence P1977 January 2017 Page 4
14/4-1 1976 8750 2667 P&A Dry 14/10-1 1975 8336 2541 P&A Dry 14/10A-2 1981 6335 1931 P&A Dry 14/12-1 1973 8050 2454 P&A Dry 15/3-1 1991 7600 2316 P&A Dry Stratigraphic test in the Dutch Bank Basin encountered a thick Jurassic section (lacking sand development) with KCF lying unconformably on the Triassic Sands. No shows but good KCF Seal and ~40 Jurassic Sands. Located South on a NE-SW striking fault, overlying the palaeo-high of the Caithness ridge. Thin 30 Jurassic sands encountered of a fairly poor quality. Over 500ft Jurassic sands with KCF ~200 ft KCF above. Drilled on the Fladen Ground Spur. It encountered ~120 ft KCF & ~100 ft ratty Piper sand stone water bearing. 15/4-1 1971 6650 2027 P&A Dry 15/6-1 1978 8955 2729 P&A Dry 15/7-1 1977 7300 2225 P&A Dry 15/8-1 1977 5928 1807 P&A Dry Drilled on the Fladen Ground Spur. Not strictly relevant to the Dutch Bank Basin Play, however the thin section of KCF interpreted which is promising for lateral seal cover in the Dutch Bank basin down dip. Located on the northern flank of the Witch Ground Graben within the Piper Embayment (Shetland Ridge to the east and Caithness Ridge to the west). It drilled ~200 ft Piper Sand and ~250 ft Heather ratty sands and ~425 KCF seal. Drilled to test Upper Jurassic sands within a downthrown fault closure. The well encountered well developed but thin Jurassic sands which were water wet. Objective to test the potential of Lower Paleocene sands and sediments beneath the Upper Cretaceous Chalk. No shows were encountered except from methane gas in the Carboniferous coals. Table 1: Well data Relinquishment Report Licence P1977 January 2017 Page 5
5. Prospectivity Update The main Witch Ground Graben area has many fields within it. These fields are mostly oil discoveries, with the prolific Kimmeridge Clay Formation (KCF) being the oil source and the main reservoirs being Jurassic-age sandstones. The thickness of these formations diminishes northward into the Dutch Bank Basin, and generally the present-day depth of burial reduces also. While this reduced burial is good for reservoir quality preservation, and the KCF provides a good seal where present, it means that the traditional KCF source rocks are unlikely to be mature for hydrocarbon generation within the application area. Prospectivity within the application area would probably therefore rely on another hydrocarbon source. Top Permian TWT structure TWT (s) N High features at Top Permian potential focussing ridges for hydrocarbon migration 10km Figure 2 Top Permian TWT structure showing possible oil migration areas Relinquishment Report Licence P1977 January 2017 Page 6
The Orcadian Basin, covering a large area including all of the application area, is believed to contain a thick pile of up to perhaps 10000m of Devonian, Carboniferous, Permian and Triassic sediments. In particular, the Devonian is believed to be present over most of this area, and within this section are the Lower Devonian Struie Formation and the Middle Devonian Orcadia and Eday Flagstone formations, all of which are lacustrine organic-rich potential hydrocarbon source rocks. These formations are expected to underlie the Dutch Bank Basin. The major events that have influenced the sedimentation and later structure of the Orcadian Basin include rifting during the Devonian, compression resulting in folding due to the Variscan orogeny, further rifting from Permian to Jurassic and then Tertiary uplift. As a result of these events, fault blocks are observed in the Dutch Bank Basin area with wells within the application area proving the presence of good quality Jurassicage reservoir rocks. It was envisaged that there are potential migration pathways from mature Devonian source rocks under the Dutch Bank Basin along high trends observed at Top Permian level up into any overlying Jurassic reservoirs within the general embayment of the Dutch Bank Basin. Topseal for any accumulations would be provided by KCF shales. In all cases, sourcing would have to be either from the Paleozoic, as described above, or from long-distance migration from the proven source kitchen of the Kimmeridge Clay Formation in the Witch Ground Graben to the south. At the time of the award, the typical seismic quality in the area was not sufficient to delineate the structural attitudes of the Paleozoic beds with much confidence, and there are few well penetrations of the section. Deeper prospectivity remains at least in concept. Recent 3D surveys acquired elsewhere along the fringes of the Viking Graben have demonstrated much improved data quality in the Paleozoic section, and it is recognised that data of such quality (and 3D) would be a prerequisite to addressing the Paleozoic potential properly. Unfortunately Chrysaor was unable to acquire sufficient extra data to establish further confidence in the deep play. That could have provided enough confidence to commit to the drilling of a firm well that was required in order to proceed in to the Second Term of the licence, as there was a drill-or-drop well in the original work programme. Without this additional, better quality data, Chrysaor was unable to keep the licence into the Second Term. Water depths in the area are modest, in the range of 400 to 500. The prognosed targets within the Jurassic sequences were expected to be encountered at depths between 4500 and 7500 TVDSS. In conjunction with CGG Veritas, who held the neighbouring P2146 Licence, Chrysaor also identified a shallower lead, called Dothraki by CGG Veritas, and Selene by Chrysaor. This lead straddled the licence boundary between P1977 & P2146 and was identified via an apparent DHI, a putative flat-spot, visible on legacy 2D seismic. This lead was postulated to be a much younger unit, probably a Beauly Sandstone, with top and base seals being provided by Beauly Lignite and Dornoch Coal units respectively. The encapsulated Beauly Sandstones were thought to pinch out onto the flanks of the high to the northwest. Relinquishment Report Licence P1977 January 2017 Page 7
The Beauly and Dornoch lignite/coal units at the location of the Selene Lead are buried to depths of approximately 3000-3300 TVDSS. At this depth the ambient temperature is likely to be in the region of 30-33 C assuming a geothermal gradient of almost 3 C per 100m, which is typical for this part of the Central North Sea. This temperature would be ideal for bacterial methanogenesis organisms within the unit. This biogenic gas would have a simple migration pathway direct from source to reservoir. The apparent flat-spot, a phase reversal at the edge of the lead and amplitude dimming below the lead all seemed to support the diagnosis of a shallow, biogenic gas accumulation. Figure 3 Top Beauly depth structure map with Dothraki/Selene prospect indicated Selene was identified by a prominent seismic reflector that appears to exhibit a Direct Hydrocarbon Indicator within the Beauly Member of the Balder Formation. The reflector appears to cross-cuts stratigraphy and exhibits an apparent polarity reversal at the edge of the structure on few 2D lines (Figure 4). Relinquishment Report Licence P1977 January 2017 Page 8
Figure 4. Dothraki/Selene dip line (NW-SE). Unfortunately analysis of the infill 2D seismic in 2015 did not support the earlier prognosed DHI and suggested that the prospectivity was limited to a number of small four-way structural closure. The other indications of gas accumulation were also ruled out and given that the only proven hydrocarbon accumulation in the area is the downdip, heavy-oil Skipper discovery, the commercial attractiveness of the Selene area was heavily downgraded. Relinquishment Report Licence P1977 January 2017 Page 9
6. Further Technical Work Undertaken To confirm whether Selene was an attrtactive drilling target Chrysaor acquired 321km of new high-resolution 2D seismic data, with a high density of lines over the prospect, allowing for a better delineation of the Selene prospect. The general structure has not significantly changed; the 4-way closure near the NW pinch-out of the Beauly wedge is still present, although smaller in area (Figure 5). The detailed interpretations now possible with high resolution data have highlighted that the flat spot observed in the old data was actually a stratigraphic boundary. A comparison of old and new data is shown in Figure 6. Detailed observation of the closely spaced new HR 2D lines show various thin horizons just pinching out onto the Beauly wedge. The stratigraphic boundary between the upper and lower parts of the Beauly wedge has been identified and mapped. It is a conventional surface with relief across the area of the Selene structure. It happens to be flat in areas where the older 2D lines run (Figures 7 and 8). Relinquishment Report Licence P1977 January 2017 Page 10
Figure 5. Top Beauly TWT map. Figure 6. Comparison of old 2D line (left) and new HR 2D line (right). Figure 7. 2D HR NW-SE (dip) lines through Selene prospect. Relinquishment Report Licence P1977 January 2017 Page 11
Note also that there are many anomalous features on the 2DHR data those are interpreted as probable fluid escapes (Figure 8). This calls into question the seal capacity of the immediate overburden in the Selene area, suggesting that water and/or gas are escaping at all of the structurally high points within the area. The increased risk on the top seal for the Selene prospect has contributed to the downgrading of the feature. Figure 8. 2D HR SW-NE (strike) lines through Selene prospect. The reflector interpreted as a flat spot apparent on the lower line - has strong relief on the upper example. Relinquishment Report Licence P1977 January 2017 Page 12
Several horizons were mapped: Top Beauly package, Top Beauly sands, Base Beauly sands, Top Dornoch, and thickness maps were produced. Figure 9 shows the closures and stratigraphic traps that were identified on the HR data: Selene Main, Selene North, Selene East and Selene Stratigraphic (on the isochron map). Figure 9. Structure maps for the Selene area. With HR seismic more closures were identified: Selene Main, North, East and Stratigraphic (on thickness map). 7. Resources and Risk Summary The 2D HR data confirmed the Selene Main 4-way closure, but with a smaller area, and identified other satellite smaller closures (Selene North and East). Although a possible stratigraphic trap could also be highlighted on the thickness map, that might be commercially developable, now the case for biogenic gas is difficult to support because the Flat Spot could not be confirmed. Heavy oil is common on the western margin of the Viking Graben, which lies about 35km to the east of Dothraki/Selene. The 9/21-2 well discovered a Beauly sand reservoir containing heavy, viscous oil (Skipper Discovery, currently being appraised Relinquishment Report Licence P1977 January 2017 Page 13
by Independent Oil & Gas). Trace oil shows were also recorded in the 9/21-1 well, also in the Beauly sand reservoir. The 9/26-1 encountered traces of dead oil. A heavy oil case is much less commercially attractive and more risky than a dry methane scenario. Scoping volumes (hydrocarbon in place figures) have been calculated for oil cases for the identified leads and are shown below. The likely API gravity for any reservoired oil would be in the low teens. Fluid Type Lead/Prospect Name HCIIP Recoverable reserves Risk Oil Cases Selene Main 73 mmbo 7.3 mmbo 0.30 Selene East 25 mmbo 2.5 mmbo 0.30 Selene North 332 mmbo 33.2 mmbo 0.30 Selene Stratigraphic Trap 806 mmbo 81 mmbo 0.08 8. Conclusions Following the acquisition of high resolution 2D seismic data on a more closely spaced grid over the licence area, the Selene Prospect has been disproven. There remain only small and high-risk heavy oil prospects as described earlier in this document. An effective Palaeozoic source rock is yet to proven in the area and given that the timing of expulsion of hydrocarbons from any such source rock is likely to have been early, possibly in Jurassic times, the risk of trapping or subsequent trap breach is also high. None of these leads are deemed to be commercially attractive at the current time, no additional prospectivity has been identified at other stratigraphic intervals and therefore Chrysaor has decided to relinquish this licence. 9. Clearance Chrysaor CNS Limited certifies that OGA is free to publish this report and that all third party ownership rights on any data or interpretations contained herein have been considered and appropriately cleared for publication purposes. Relinquishment Report Licence P1977 January 2017 Page 14