The Chaal Permit covers an area of 1,200 km2, situated onshore central Tunisia approximately 50 km west of the city of Sfax.
Candax (60% WI and operator) and its partners SMIP and Mitsubishi (each 20% WI), have high expectations for this very large gas/condensate discovery, which has multi-Tcf potential.
The Chaal structure was previously penetrated by wells ABK-1 and ABK-2 in the 1960s. Well ABK-1 tested gas and condensate from several intervals in an estimated 150 metre hydrocarbon column, at aggregated rates up to 3 MMcf/d and 25 to 80 bbl/MMcf. Well ABK-2 drilled 2 kilometres to the south, encountered excellent shows across the same interval, but was not tested.
In 2006 Candax and partners completed the drilling of Well Chaal-1, which was drilled between the two original wells. The well penetrated a 450 metre gas-bearing section of Middle/Lower Nara reservoir. The reservoir comprises low porosity, shaley and fractured limestone. Well logs indicated a net reservoir of 90 metres and porosities in the range of 3 to 8%. Despite experiencing good shows and a number of significant gas kicks during drilling, no significant sustained levels of gas were recovered during testing. The Company believes that this was a combination of formational damage caused by the high mud-weights required to control the gas kicks, the lack of suitable equipment during testing and mechanical failure of the testing string. Although no sustained gas rates were tested, surface samples of gas indicated over 99% hydrocarbons with few inerts and little H2S (0.04%). From the surface samples the condensate ratio is estimated to be in the order of 50 bls/MMcf. Following the failure of the test string, the well was suspended for a future re-entry.
The partners have undertaken technical work on the results of Chaal-1 to determine the optimum forward work program for the discovery and it is planned that the well will be sidetracked at a high deviation angle in order to intersect the fractured reservoir and substantially enhance the likely productivity. The net cost to Candax to drill is US$5 million and partner approval has been obtained, however a firm drilling date has yet to be determined as Candax is focusing its capital on low cost, near term incremental production. Ryder Scott completed an independent estimate of natural gas resource potential on the Chaal Permit in Tunisia, effective December 31, 2006, and classified Chaal as a Contingent Resource with an un-risked, high case estimate of 1.7 Tcf gas in-place, with a recoverable contingent resource of 854 Bcf.
Tunisia's domestic gas market capacity is approximately 150 MMcf/d and is expected to grow significantly over the next five to ten years. Gas prices are pegged to 80% of Mediterranean LSFO (low sulphur fuel oil), which at $90 Brent equates to approximately $9/Mcf. The Chaal prospect is located close to infrastructure with a gas trunk line crossing the permit 15 km to the east. The Contingent Resource value of the Chaal structure is therefore very substantive.
* Ryder Scott Report 31/12/06