Last updated: Wednesday, December 9, 2009

TG World Energy Corporation’s indirect interests in oil and gas properties and prospects located in Niger are held through its wholly-owned subsidiary TG World Petroleum Ltd. ("TG Niger"). The Ténéré Block measures some 71,155 km2 (17.3 million acres) and covers the northern portion of the Termit-Ténéré Rift Basin in eastern Niger. The Termit-Ténéré Rift Basin is one arm of a series of rift basins that extend across north-central Africa. Similar basins in Libya, Chad and Sudan are currently in oil production. The southern half of the Termit-Ténéré Rift is covered by the China National Petroleum Corporation (“CNPC”) participated Agadem Block, where there have been nine oil discoveries and one gas discovery amounting to approximately 500 million barrels of oil equivalent (estimated).

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TG Niger holds a 20% carried interest in an oil and gas exploration licence with Chinese National Petroleum Company International Ténéré Ltd. (“CNPCIT”), a subsidiary of CNPC, that allows for the partners to drill in the Ténéré Block. 

Under terms and conditions of the partner agreements, CNPCIT is obligated to pay 100% of TG Niger’s share of costs for the Minimum Work Program of the First Exploration Period, including project related general and administrative costs. The major components of this Program are the acquisition, processing and interpretation of a minimum 1,500 km of seismic data and the drilling of three exploration wells. If the project results in petroleum production, TG Niger will be required to repay its carried costs to CNPCIT, without interest, from a portion of its share of future production from the Ténéré area.

To date, CNPCIT has reprocessed 5,717 km of vintage seismic data located across the Ténéré Block. In addition, CNPCIT acquired 3,965 km of new 2-D seismic data, which was 2,465 km in excess of the minimum commitment.  CNPCIT paid all costs as the seismic acquisition was done prior to the completion of the second exploration well.  CNPCIT has also drilled two of the three required exploration wells – Saha-1 and West Fachi-1. Both wells had hydrocarbon shows, but were subsequently abandoned.

Exploration Program - Facai-1

At the technical and operating committee meetings (“TCM/OCM”) held in Beijing, CNPCIT presented their geological assessment of the Ténéré Block hydrocarbon potential and two new geological plays were proposed for drilling. At the meetings, TG Niger and CNPCIT approved the drilling of the Facai-1 exploration well to a 3,700 metre total depth. This prospect, located 100 km to the north of previous well Saha-1, is a faulted inversion anticline with the Cretaceous-age Donga sandstone as its primary reservoir target. The Donga sandstones had low porosity when encountered at 3,200 - 3,500 metres at the base of Saha-1, but are predicted to be at 2,000 metre shallower burial depths in Facai-1. Oil source is postulated from deeper syn-rift lacustrine shale beds, though the presence of a source is considered the highest risk element of the prospect. With success, there is a large play fairway with a number of follow-up prospects that have been mapped.

TG Niger will be fully carried for its 20% share of the costs for the Facai-1 well through to testing. Facai-1 was originally scheduled to be spud in May 2008, but operations were suspended due to a security warning issued by the Government of Niger for the Agadez region following conflict with Tuareg groups.  The security warning was lifted in November 2009 and TG Niger expects drilling to recommence in 2010. TG Niger also has the option to participate in future exploration wells by paying its 20% share of costs, or to go penalty. Under the Joint Operating Agreement, the TG Niger has the right not to participate in wells that are in excess of the minimum required work program as committed in the contract. In the event of a discovery, TG Niger may earn back in through the payment of a penalty premium. TG Niger’s participation in further exploration wells will be dependent upon the ongoing geological studies and the results of the Facai-1 well. If TG Niger has to pay the penalty to back-in into an oil discovery, it will have maintained its 20% interest in all the on-trend prospects with no further penalties. A 2,000 km 2-D seismic program has been planned for acquisition. The seismic lines are designed to mature leads on trend with the Facai-1 prospect and to provide additional control in a sub-basin to the north. TG Niger expects to participate at its paying interest in a minimum 800 km of the program, with further participation dependent upon ongoing geological studies. TG Niger’s 20% share of costs for the 800 km is estimated to be US$1.3 million.

The Operator

The operator of the Ténéré project is CNPCIT, an international arm of CNPC, China’s largest oil company. CNPC is a fully integrated, world-class energy corporation with interests in upstream and downstream operations, oilfield services, engineering and construction, petroleum material and equipment manufacturing and supply. CNPC’s subsidiary, PetroChina Company Ltd., is listed on the New York, Shanghai and Hong Kong stock exchanges. As of December 2009, CNPC had oil production of approximately 2.38 million barrels of crude oil per day, gas production of 5.09 billion cubic feet per day, oil reserves of 3.00 billion tons, gas reserves of 2,674.3 billion cubic metres and oilfield services and engineering construction operations in 44 countries around the globe (Source: CNPC).