2017 Senegal appraisal to kick off in January

Cairn Energy confirmed today that it will return to drilling offshore Senegal by the end of January this year, with two firm wells designed to further evaluate its 473mmbbl SNE discovery. The Stena DrillMax is contracted for these two appraisal wells together with multiple follow on options yet to be confirmed but which could include exploration wells in addition to further appraisal.

Cairn has estimated that drilling costs would account for over 50% of the SNE development expenditure, however partner FAR has indicated that the upcoming wells will benefit from significantly lower costs than in the previous campaigns. Although the day rate for the Stena DrillMax is not provided, similar drillship the Stena IceMax is contracted to drill in the Porcupine Basin for Providence Resources at a day rate of $185,000. Meanwhile Seadrill’s West Freedom drillship drilled the Mesurado exploration well for ExxonMobil at a day rate of $225,000, substantially reduced from $634,000 on its previous 2016 contract.

The two planned wells, SNE-5 and SNE-6, will be drilled in the southern part of the SNE field between 2016 appraisal wells SNE-3 and SNE-4 and are designed to test the connectivity of the upper reservoir section.

The upper reservoirs contain many layers that are finer grained and slightly thinner than those in the lower zone. Although the upper zone produced around 5,400 bopd during the SNE-3 drill stem test (DST), a slight pressure depletion was observed, indicating poorer connectivity and leading to greater uncertainty of recovery from these layers. It should be possible to maintain pressure in some of the layers with waterflooding, however others may have to be produced by depletion.

In order to establish the deliverability and connectivity of the upper reservoir, DSTs will be carried out on both SNE-5 and SNE-6. Following the testing of SNE-5, the well will have permanent gauges left in the upper reservoir. The DST of SNE-6 will be extended to include an interference test ie generating a pulse that should then be registered by the gauges in both SNE-5 and in SNE-3, which had permanent gauges installed in 2016. Successful flow and interference test results would support connected reservoir units and point to a higher recovery factor.

Since the larger part of the SNE gross volume is in the upper reservoirs, a greater upside can be achieved by confirming how much can recovered from these layers. With a 3C STOIIP of 4150mmbbls, a small increase in recovery factor (currently estimated at just under 22% for the full field) can deliver a significant increase in recoverable upside.