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Last updated: Thursday, December 23, 2010

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 adjacent Agadem Block, where the China National Petroleum Corporation ("CNPC") has made a series of oil and gas discoveries amounting to greater than 350 million barrels of oil equivalent (estimated).

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Ténéré Block, Niger

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 from 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 in March 2010, CNPCIT presented their geological assessment of the Ténéré Block hydrocarbon potential and proposed a new geological play 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 following conflict with Tuareg groups. The security warning was lifted in November of 2009 and CNPCIT has since advised TG Niger that it intends to begin rig preparation and mobilization in 2011, with an objective of drilling the well in Q2. This timetable is dependent on the political and security situation in Niger at the time.

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, 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 opts 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.

 

The Operator

The operator of the Ténéré project is CNPCIT, an international arm of CNPC. CNPC is China's largest oil and gas producer and supplier, as well as one of the world's major oilfield service providers and a globally reputed contractor in engineering construction, with businesses covering petroleum exploration & production, natural gas & pipelines, refining & marketing, oilfield services, engineering construction, petroleum equipment manufacturing and new energy development, as well as capital management, finance and insurance services. As of October 2010, CNPC had oil production of approximately 2.75 million barrels of crude oil per day, gas production of 7.22 billion cubic feet per day and oilfield services and engineering construction operations in 49 countries around the globe (Source: CNPC).