Empyrean gearing up to drill another ‘world-class conventional light oil target’ off China

Empyrean setting the stage to drill another well off China

Following disappointment due to no oil pay in the Jade prospect well, AIM-listed oil and gas exploration company Empyrean Energy has revealed its intention to proceed with the second phase of exploration at Block 29/11 by participating in the drilling of another high-impact prospect offshore China.

Illustration; Source: Empyrean Energy

Empyrean announced on Wednesday that it had made up its mind to proceed with the drilling of the second prospect – known as Topaz – within Block 29/11 based upon the preliminary assessments of the Jade well results and the ongoing agreement with its partner, China National Offshore Oil Company (CNOOC), to further cooperate in regards to follow up post-well analysis.

Tom Kelly, Empyrean CEO, remarked: “Whilst we are extremely disappointed with the results of the Jade well, we have made significant investment of resources and time in systematically maturing the prospectivity of this large block. Empyrean’s early assessment is that the much larger Topaz prospect remains a world-class conventional light oil target that, based on existing understanding of available data, will be drilled.”

According to the company, final logs have been run at Jade, confirming several elements of the pre-drill prognosis, including intersecting 292 metres of an excellent quality reservoir and more than 2,330 metres of regional marine clay seal formation. Additionally, the validity of the trap was confirmed by intersecting the reservoir top within the anticipated depth. The demobilisation of the NH9 rig – owned by China Oilfield Services Limited (COSL) – is expected to take place over the next few days.

Empyrean explained that Jade was chosen over Topaz to be drilled first because it was a four-way dip trap with less structural risk and a slightly higher geological chance of success, situated closer to the proven Bayiun Sag East source rock in the basin.

Even though the drilling of the Jade well proved that there was no oil migration into the Jade trap, oil migration has effectively charged the four CNOOC light oil discoveries to the immediate west and southwest of Empyrean’s permit.

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The pre-drill interpretation of the recorded elevated gas (C1) at the Jade well indicated a gas cloud zone, however, post-drill analysis of 3D seismic data indicates this was a result of gas migrating vertically via a large basinal fault followed by lateral migration through coarser clays in the 1550 metres to 1800 metres MD zone.

Therefore, while the Jade prospect had relied on relatively long-distance direct oil migration from Baiyun Sag East source rock – located over 26 km to the south – the Topaz prospect relies on more local oil charging mechanisms. Primarily, it has the potential to be charged by the newly identified – Baiyun Sag North – located less than 6 km to the southeast of Topaz.

In addition, the cooperation between CNOOC and Empyrean on the respective data sets shows there is a potential migration pathway from CNOOC’s LH16-2 discovery well spilling to the Topaz prospect.

Pre-Jade drilling, Gaffney Cline independently assessed a target in place oil estimate of 506 mmbbls (mean case) of oil and an upside of 891 mmbbls (P10 case) for the Topaz prospect with a 30 per cent geological chance of success (GCoS).

Based on Empyrean’s statement, the Jade well results have confirmed the trap definition of the Topaz prospect, providing confidence in the reservoir, trap and seal of this prospect. Similar to Jade, effective hydrocarbon charge has been recognised as a key remaining geological risk for the Topaz prospect.

Empyrean is the operator of Block 29/11 in China with 100 per cent working interest during the exploration phase. However, its partner, China National Offshore Oil Company (CNOOC), may assume a 51 per cent participating interest in the development and production phase should a commercial discovery be made.

Empyrean mulling over funding options for Topaz

As per the terms of the PSC, Empyrean needs to decide to enter the second phase of the exploration period at Block 29/11 by 12 June 2022. This phase of exploration involves the commitment to drill the Topaz prospect before 12 June 2024.

Following the results from the Jade well and several technical meetings with CNOOC, Empyrean’s current intention to proceed with the second phase of exploration at Block 29/11 and to participate in the drilling of the Topaz prospect is subject to the availability of financing.

In light of this, Empyrean says that it is currently considering its alternatives to funding the drilling of the Topaz prospect while preparing a work program that could see the Topaz well drilled within the next drilling weather window in the Pearl River Mouth Basin in the first half of 2023.

As the demand for oil and gas in the South East Asian region is strong and growing, the company plans to maximise the value of its interest in the Mako Gas Discovery on the Duyung permit in Indonesia to participate in the drilling of the Topaz prospect.

Due to a slightly shallower target depth and given the very large target size, Empyrean also intends to investigate potential risk share alternatives and farm out possibilities in regards to the Topaz prospect.