Blue Creek Project, Belize

Overview

The Blue Creek Project consists of one 315 sq km onshore oil concession divided into two blocks located in NW Belize. The two blocks, Blue Creek and West Gallon Jug, are granted under a Production Sharing agreement with the government of Belize. The concession lies in the hydrocarbon producing Petén Basin that extends across northern Guatemala into northern Belize and southeast Mexico.

Within 34 days of listing, New World Oil and Gas completed a Farm-Out Agreement ('FOA') to acquire up to a 100% participating interest in the Production Sharing Agreement ('PSA') with the Belizean government over the Blue Creek Project, subject to the completion of a staged work in programme. The programme consists of a four phase 2-D seismic acquisition programme and the completion of three exploration wells. The Company’s partner, Blue Creek Exploration Ltd, will revert to a 5% overriding royalty interest upon New World having earned the full 100% participating interest.

The concessions lie due east from the Xan and Chocop oil fields of northwest Guatemala and north of the recently discovered Spanish Lookout and Never Delays oil fields belonging to Belize Natural Energy Ltd. Both have reported reserves in the range of 25MMbbls and are thought to be geologically similar to the prospects developed on the Blue Creek Project thus far. The multiphase seismic interpretation points to very similar subsurface trap style of the nearby Spanish Lookout  Field. Seepage oil detected in surface geochemical surveys in the Blue Creek Block are identical to oil produced at Spanish Lookout and Never Delay, providing evidence that oil generation and migration originated from the same source rock.

The western edge of the Blue Creek Project is adjacent to a 20,000ft deep sub-basin in NE Guatemala and adjacent Mexico. Oil migration from mature source rock kitchens areas in this sub-basin are shown by the black arrows on the map below.  The map, based on aeromagnetic data from a recently published study, shows postulated oil migration pathways along with exploration and production wells (blue dots). 

2012 saw the commencement of a drilling programme in Belize.  Having reduced drilling costs by 28% due to an amendment to the Farm-Out Agreement with New World’s partner Blue Creek Exploration Ltd, the first well, Blue Creek#2, commenced drilling at the end of September 2012 on the B Crest Prospect that had been assigned a P50 resource estimate of 329MMbo by RPS.  Because of the reduction in drilling costs, and having not seen clear evidence of oil accumulating in the Y1 and Y2 formations, the decision was taken to drill deeper to the Y3 and Hill Bank Formations.  Live oil shows were also encountered in these deeper formations and a well was drilled to a depth of 10,490ft.  Due to a high level of water saturation in these lower formations, Blue Creek #2 was deemed to be non-commercial, but as a result of the encouraging shows, a decision was taken to drill a side-track well, the Blue Creek#2A ST, to place the bottom hole location of the well up dip to the original planned bottom hole location in an effort to locate a trap.  

The side-track well confirmed that the Blue Creek Project is indeed in an active working hydrocarbon system, but it was also determined that due to high water saturations in both the Y3 and Hill Bank intervals, the trap that existed at this location at some point in geologic history was breached, likely as a function of recent fault movement allowing oil which had accumulated there to leak off rendering a completion and subsequent well uneconomic.  Oil was found on the mud logs, open hole logs and was seen on shakers at the surface, but unfortunately was not on a commercial scale. 

Analysis of the well data for both the B Crest side track and the Blue Creek#2 wells indicated the lack of an effective trap as the primary reason for only non-commercial quantities of hydrocarbons being encountered at the B Crest prospect.  During drilling, it was noted that the Hill Bank formation was loaded with residual oil, suggesting that oil had already migrated through the area source rock and kitchen area, however, again some form of tectonic activity caused the fault planes to leak and allow oil which had accumulated there to continue migrating past our location to the east moving up-dip.

In March 2013, drilling commenced at a third well, Rio Bravo#1, on the West Gallon Jug Crest Prospect, approximately 35 km SSW from the B Crest.  RPS assigned West Gallon Jug P50 resources of 113MMbbo.  The well was drilled to a total depth of 9,010 ft and again, as with the B Crest wells, live oil and gas shows were encountered in the Y3 and Hill Bank formations.  Extensive residual oil was also present along with high saturations of formation water.  It is probable, however, that the timing of oil migration occurred prior to trap formation. 

The Blue Creek#2, Blue Creek#2A and Rio Bravo#1 wells were drilled to test two structures.  Encouragingly, all three wells encountered hydrocarbons in both structures over the entire objective interval.  The wells, therefore, demonstrate the presence of an active hydrocarbon system on New World’s licence area.  Furthermore, nearly all porous dolomite intervals were found to be oil-bearing and in some zones, free live oil was observed.  However, no commercial accumulations were identified, again due to high water saturations.  It is noteworthy that these two drilled prospects as well as the prospect in the adjacent licence area are all located in separate fault blocks, and, from an oil accumulation and geologic standpoint, are independent of each other.  As a result, the Directors believe each structure is unique in its geologic evolution, factoring in all the elements of a working hydrocarbon system and hydrocarbon charge characteristics.

The seismic and drilling programme to date has significantly de-risked the Blue Creek Project as mentioned above.  The abundance of traces and shows of oil and gas in the recently drilled wells shows that up-dip migration from the source rocks is taking place through the Blue Creek licence area.  Clearly, hydrocarbon migration pathways formed by porous dolostone sequences, fracture systems and through leaky fault planes are present in the licence area and the adjacent licence where a recent discovery has been made by a neighbouring oil company.

A large remaining unanswered question for the Blue Creek Project is the identification and location of subsurface traps.  As Belize Natural Energy has found multiple traps in both its Spanish Lookout and Never Delay fields, and following the announcement by the government of Belize of a discovery, still under evaluation, on the Maranco block immediately to the south of the Blue Creek project, the confidence of the Directors that a trap will be found on New World’s blocks increases.  The Company concludes that there is clearly oil and gas potential in the remaining undrilled structures and is currently working very hard reviewing the seismic data and integrating the new drilling results to re-evaluate and confirm continued exciting prospectivity potential.