TAG Oil was formally awarded a petroleum services agreement on September 11, 2022 by Badr Petroleum Company (BPCO) to develop the unconventional Abu Roash "F" reservoir in the Badr Oil Field (BED-1), a 107 km2 (26,000 acres) concession located in the Western Desert of Egypt.
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Over the last several months, TAG Oil completed an evaluation of the data package provided by the Egyptian General Petroleum Corporation (EGPC) for BED-1. After extensive negotiations with EGPC, the Company submitted its final letter of intent on May 29, 2022 to develop the ARF formation in the BED-1 concession.
The Company received a confirmation letter on August 24, 2022, referencing the Letter of Intent, which confirmed that EGPC had commissioned BPCO to conclude the petroleum services agreement (PSA) with TAG Oil. The final draft of the PSA has been completed and initialed by all parties, and the Company anticipates that it will become effective shortly upon TAG Oil posting a performance letter of guarantee for US$6.0 million.
The Badr Oil Field was discovered in 1982 by a joint venture between Shell Oil and EGPC (Bapetco). There has been significant historical production across the concession from conventional reservoirs of light oil and associated natural gas through primary development of the Kharita, Bahariya and certain Abu Roash sandstone formations.
The ARF reservoir produced conventionally from some wells with considerable initial oil rates but has declined rapidly as this is the nature of such tight reservoirs.
TAG Oil has conducted a detailed technical analysis of the geologic, geophysical and well production data of the target ARF zone, which is a deep, tight, low porosity, low permeability carbonate reservoir with varied fluid characteristics across BED-1.
TAG Oil has determined that there is a high probability for successful commercial development of the ARF reservoir by applying proven technologies including long-reach horizontal wells, hydraulic fracture stimulation and potentially other enhanced oil recovery production techniques.
These methodologies have been successfully implemented by TAG Oil's management team expertise in the past in reservoirs in Canada, Albania and Egypt, and by other operators in analogous properties in Canada and the USA.
The data provided to TAG Oil by EGPC indicates that the ARF contains significant volumes of oil in place in the BED-1 concession and tested medium gravity crude oil without stimulation. Production profiles from these wells demonstrated high initial rates with rapid decline consistent with the nature of primary depletion in tight, low porosity reservoirs.
The ARF zone has not been commercially developed under conventional completion technology by previous operators. To verify the resource potential of the oil in place volumes and assess TAG Oil's proposed development plan for this play, the Company has engaged the services of an independent engineering firm, RPS Energy Canada, to evaluate the oil resources associated with the ARF zone in the BED-1 area. ■