Southern Pacific Resource Corp STPJF

RE: RE: RE: 2015 AND BEYOND

[Box927]

Hi TTSB

I think you really need to take a trip to China. I have been there 3 times over the last 8 years.
I went to work overseas in the drilling industry in 1978 and have worked in 11 different countries both on and offshore so I know a little bit what I am talking about.
 
Back then Saudi had the capability of producing 10 mmbpd. Back then the average Ghawar well flowed at about 1800 psi. Now they flow at less than 500 psi. Pressure vs volume rule of thumb. Double the volume and you quadruple the pressure or vise versa if all other things remain constant. So in short the average Ghawar well is producing about half the volume. A friend of mine spent the last 3 years over there working for Saudi Aramco. All he did in those 3 years was drill attic wells. These are horizontal wells which are designed to try and capture any oil at the top of the formation which is left behind. They are complcated to drill and very expensive. The rig count in Saudi has just exploded in the last 4 years. Why?? They have to drill like crazy just to maintain production.

I spent over 3 years drilling in Venezuela's Orinoco basin. A 7500 ft. horizontal well that would take us 5 to 7 days to drill is now taking between 20 to 25 days to drill because Chavez chased out all the people who knew anything.

What is going on in the drilling industry at the moment is just plain scary with regards to the lack of experienced people. The wells are taking longer to drill and you would not beleive the screw ups that are happening which just explode the costs. I will not even bother talking about Iran where I worked about 10 years ago. What a mess and from what I hear it has gotten worse.

What is going to happen in Iraq once the US starts to pull out in 18 months which is what Obama says he wants to do. My bet is the urgent upgrading of their tired old oil infrastructure is going to suffer a major set back.

I just did a contract in Algeria. The cost to drill and test a 2400 meter exploration well was US$ 24.5 million and would take about 90 days if they are lucky. This was a remote well and had no chance of being tied in even if they were lucky enough to hit something. They would have to continue to drill and prove up trillions of cubic feet of gas to make the economics work. Just look at the history of First Calgary Petroleum if you want an example of the cost and time frame to bring a good field into production. By the way I was not working for FCP.

No my friend you are living in a dream world if you think that the impotance of oil has gone bust. In many ways I wish you were right but from what I know I think you are just plain wrong. What has happened in the credit markets lately has just added fuel to the fire with regards to future production. Down the road we are going to see some very expensive oil & gas. $200/bbl is very possible.

Regards