It’s November 2007, and the news from Iraq is bleak.
The hoped-for peace following the second Gulf War has not materialized and television reports are feeding us a daily diet of bombings, kidnappings and other atrocities.
And then the news comes into the London office that Gulf Keystone Petroleum Ltd., my employer, has secured an interest in two blocks in the Kurdistan Region in northern Iraq, becoming operator of the Shaikan block.
I have to admit that I was less than thrilled at the prospect of visiting the Kurdistan Region, as would inevitably be my fate, as head of Gulf Keystone’s operations. At the time I was unable to disassociate the Kurdistan Region from the general news coverage of the wider Iraq.
Despite the assurances of our Kurdish colleagues, I spent the next three weeks worrying about security for our first fact-finding trip to Erbil, the capital of the Kurdistan Region of Iraq.
Imagine my surprise and relief to find that Iraq’s Kurdistan Region had a totally benign security environment. The Kurds turned out to be pro-western, pro-business and totally in control of their region. That was in December 2007 and has continued to this day.
The Kurdistan Region is an autonomous region in federal Iraq. It borders Syria to the west, Iran to the east and Turkey to the north, where fertile plains meet the Zagros mountains, and is traversed by the Tigris, Greater Zab and Lesser Zab rivers.
The region covers an area of 40,643 square kilometers and has a population of just under four million. Kurdish, Turkmani, Arabic, Armenian and Assyrian languages are spoken there.
Gulf Keystone at this time was a small independent oil explorer with a share price of about 30 pence and some interests in Algeria – and these new assets in Iraq. Gulf Keystone and a number of other independents signed Production Sharing Contracts with the Kurdistan Regional Government in November 2007.
Notable by their absence, from any of these deals, were the international oil majors. It would appear they had their eyes on the large oilfields in the south of Iraq and were taking seriously the federal Iraq’s rhetoric about blacklisting companies operating in the Kurdistan Region.
This, of course, left the door open for independents prepared to take the risk. Gulf Keystone could see this was a world-class opportunity and took the plunge.
A Few Challenges to Face
The surface geology suggested that the Shaikan block contained a single elongate east-to-west trending, asymmetrical anticline with two culminations, an eastern and a western one. Gulf Keystone’s commitment for the block was to shoot 100 kilometers of 2-D seismic data and to drill a well within the three years.
We started shooting a 170-kilometer 2-D seismic program in April 2008 and completed acquisition later that year. The data was acquired from both vibroseis and dynamite sources.
When processed, we had relatively good data for the vibroseis areas, shot on the low-lying flanks of the anticline with Tertiary, Fars cover and relatively poor data over the anticline’s rugged crest, where we had used a dynamite source and where the Tertiary cover is breached.
Despite the poor quality data masking the anticline’s crest, it was clear from the flank data that the anticline in the subsurface was broadly a mirror of the surface expression – although there was no evidence of two culminations in the subsurface. Choosing a well site was a compromise between trying to get close to a crestal location and finding a topographic setting, which could be accessed by a rig.
Company instructions were to spud our commitment well during 2008. Gulf Keystone’s approach was aggressive: Be one of the first, if not the first, to drill.
We set about finding a rig, along with the other services essential to well drilling. The biggest problem was finding companies that were willing to come to Kurdistan. In the wider world there was no differentiation, in terms of safety, between Iraq in general and the Kurdistan Region. The unremitting bad news about security in central and southern Iraq meant that most international service companies were unwilling to send personnel to the country.
Nevertheless, we did manage to find a new rig, Weatherford’s Rig 842, which was brought from Houston to the Shaikan field, entering the region via Turkey. Other essential services were available from either local companies, set up to explore this market niche, or from regional Middle East companies based in the Arabian Gulf.
Most of the large, familiar, western service providers were not to be found. Call-out contracts were not an option, as few companies had a base in the Kurdistan Region – so all services, from mud to well testing, had to be based at the rig-site on a permanent basis.
The Shaikan-1 exploration well, the first ever well to be drilled by Gulf Keystone in the Kurdistan Region, spudded on April 27, 2009.
Shaikan-1 was designed to test the Cretaceous, Jurassic and Triassic formations with the possibility of extending to the Permian. All of these formations consist primarily of carbonate, and we spent several months on the well – much of the time drilling blind or with minimal returns.
From the outset the returns – when we did get returns – were bitumen-stained, and this was the case throughout the Cretaceous. In the Jurassic we were getting spotty shows of heavy oil, but were still fighting lost circulation.
In all we lost more than 400,000 bbls of drilling fluid into this well.
Upon reaching the Sargelu formation, a well-known source rock in Iraq, we decided to conduct an open hole drill stem test (DST). We had signs of oil and permeability, while losing mud.
We opened the well for DST#1 at a depth of 1,450 meters to 1,510 meters on Aug. 2, 2009. After 45 minutes we had oil at the surface.
The surface DST equipment was inadequate to fully test and evaluate the subsequent flow, but it was obviously significant. Preliminary test rates indicated 5,000 to 8,000 barrels of 21 to 22 degree API oil per day, with flowing wellhead pressures of 290 to 350 pounds per square inch (psi).
The productivity index was 30 barrels of oil per day per psi.
We went on to drill a further 1,500 meters with regular oil shows and lost circulation events. We conducted further open and cased hole DSTs. We never produced any formation water and could find no water contacts on the logs.
This well turned out to be transformational for Gulf Keystone. We have discovered a very significant oilfield, which today is estimated to hold between eight billion and 13.4 billion barrels of gross oil-in-place, according to independent estimates. Appraisal wells have both extended the accumulation and pushed the lowest known oil deeper.
The reservoirs at Shaikan are highly fractured, which makes the ultimate recovery impossible to predict, but we can say with certainty that this field is huge and that it will prove to be economic.
Today, Shaikan is considered one of the world’s largest oil discoveries of the last decade.