How oil and gas are resources estimated with MJ#1 detail
The MJ#1 section at the bottom of this post is information added to the original post.
From 5/15/2017 PR announcing the rig was raised over MJ#1. Victor Carrillo, CEO of Zion Oil and Gas:
An independent third party engineering report affirmed Zion's internal interpretation of multiple geologic target horizons with the potential of very significant oil-in-place estimates if a discovery is made
The oil-in-place was estimated from seismic data and data from other wells previously drilled that were thought to be similar.
At the time of the 5/15/2017 PR the existing info was:
Oil-In-Place 1. Area of field from seismic maps. 2. Thickness of producing zones from seismic maps and other wells. 3. Voids in the rock (porosity and cracks) where oil is held from other wells. 4. Saturation factor, which is the degree oil fills the voids, from other wells. 5. Volume compression which has to do with gas dissolved in the oil, which means less oil volume on the surface than in the reservoir, from other wells. 6. Source rock was right depth and right organic matter type to produce oil from knowledge of geology.
Recoverable Oil (% of oil-in-place than can be commercially produced) A. Resistance of the rock to give up the oil (permeability) from other wells. B. Resistance of the oil to flow (viscosity) from other wells. C. And most importantly, pressure of the reservoir to drive the oil to the wellbore, from other wells.
Info known after drilling and logging, but before flow testing. 1. No new info. 2, 3, 4, and 5. Logs from MJ#1 give better numbers than those assumed from other wells. 6. Oil confirmed. A. Logs from MJ#1 give better numbers than those assumed from other wells. B. Viscosity of oil collected in MJ#1 can be analyzed. C. And pressure was measured at 7,500 psi in MJ#1, which is very high! And higher is better.
Info known after flow testing the first well in a new field I. Confirmation of viscosity, permeability, and pressure working together to flow oil to the surface. Until this is done, it's all just math. Seeing oil flow is the proof.
II. Volume of field (area and depth) calibrated with pressure signature when valve is closed after flowing oil. Its still just an estimate though. More wells will have to be drilled to know for sure.
III. Improved estimate of recoverable oil (oil-in-place times % that is recoverable) which will become a "reserve" number. This is still an estimate with probabilities. Many wells over a long time will allow accurate updates to the reserve number.
MJ#1 Detail
The above stratigraphy chart was created prior to drilling MJ#1. A first order estimate of MJ#1's reservoir can be created by combining assumptions from PR info with this chart and with expected reservoir parameters published in the 2015 report. The report can be found at
The first thing to note from the chart is the 5 target zones to explore for hydrocarbons: 1. Early Cretaceous Limestone 2. Early Cretaceous Sandstone 3. Upper Jurassic Limestone 4. Lower Jurassic Limestone 5. Mohilla Triassic
Info about zones of interest from various PRs found at zionoil.com can perhaps be summarized as:
Lower Cretaceous Estimated 1220 meters to 1830 meters (4,000 ft to 6,000 ft) Drilling in this zone from early June until about 8/9/2017
7/20/2017 PR at 1630 meters: no drilling concerns
10/12/2017 PR Carrillo "4 zones between 4,000 and 6,000 ft worthy of possible production testing"
Upper Jurassic Estimated 1830 meters to 3300 meters (6,000 ft to 10,800 ft) Drilling in this zone from about 8/9/2017 until 10/12/2017
8/22/2017 PR at 2,000 meters: Russell "last few hundred meters suggests the possible existence of a highly fractured carbonate section in the Jurassic, which presents optimism for potential reservoir characteristics.
8/22/2017 PR at 2,000 meters: Guinn "Given the formation characteristics that can be expected with highly fractured carbonates, we made the decision, to insure safety and well integrity, to case this interval at a shallower depth than anticipated."
Shareholder Meeting Video - Guinn Operations Update- Paraphrased quote at 18:00 mark: "After setting and drilling out from 18-5/8" casing, drilled down to 1670 meters and everything was fine, but we ran into some problems. Geology made drilling very difficult. Lost circulation zones. Did not know how we were going to get this well drilled due to 100% lost circulation. Drilling fluid to cool bit and remove cuttings was all doing into the formation. Water started coming in from another formation. Had to set casing again at 2,000 meters, which is 700 meters earlier than planned. Challenge to get to 4,500 meters. How to get 2,500 meters with last shot (7" casing). When drilled out at 2,000 had no idea if the same problem would occur again. Fortunately able to stabilize the wellbore and drill down to 3,300 meters. Almost a mile, almost 1,400 meters without casing to protect the wellbore."
Commentary: The very upper Jurassic did not have enough formation pressure to balance the drilling mud, hence the mud flowed into the formation. The low formation pressure, along with water coming into the well, may have eliminated the very upper section of the Jurassic from being of interest for production testing given the other zones were so promising. Once the low pressure formation and water bearing formations of the upper Jurassic were cased off, drilling could continue.
Lower Jurassic Estimated 3300 meters to 4600 meters Entered this zone about 10/12/2017; pause announced 11/2/2017; resumed 12/9/2017
10/12/2017 PR at 3308 meters: Carrillo "increased total gas and heavy gas component indications (shows) an order of magnitude than previously seen indicate about to penetrate the Triassic Mohilla"
Commentary: gas in the circulating mud, measured by chromatography, indicated an oil "show" due to gases heavier than methane (natural gas) that are present when oil is present. Candidate heavy gases indicating oil would be propane, butane, etc. Also the gas flow from the new strata was at least 10x greater than from the previous. The team thought the bit had penetrated the long awaited Triassic, but the geology is difficult to discern while drilling. The strata order is known, but there are a few intermediate layers that can be a surprise and the depth of each strata can vary from well to well. So, most likely the logs later revealed that they were not entering the Triassic at 3308 meters, but continuing through the Jurassic. Logs can tell the story more precisely than looking at cuttings while drilling.
11/2/2017 PR at 3343 meters: Guinn " After encountering a material section of shale, followed by a return to fractured carbonates with continued increasing hydrocarbon indicators, we felt it was in the best interest of all involved to take a conservative approach to protect the wellbore"
[img]Commentary: the material section of shale was likely the lower Jurassic cap rock, and just below it was the reservoir of fractured carbonate. The bottom hole pressure can be calculated while drilling. When the bit punched through the shale cap rock, somewhere between 3308 meters and 3343 meters, they were astounded at the high pressure at the bottom and had to shut down for 42 days awaiting upgraded well control to avoid a blowout. Drilling the lower Jurassic from 3,343 meters to 4,620 meters proceeded and likely a zone(s) of interest for at least gas, and probably oil given the "shows", was identified due to the favorable fractured carbonate reservoir. The Jurassic being a prolific gas producer offshore Israel as well as a prolific oil producer in Saudi Arabia's Ghawar field. [/img] Upper Triassic (Mohilla)
1/5/2018 PR at 4329 meters: Carrillo "Various factors have influenced our decision to drill 500 meters deeper than our originally planned TD. Most significantly is that we want to see as much of the deep Triassic Mohilla formation as possible. Mohillia is a significant oil producing horizon in Meged Field drilled to 4,700 meters"
1/31/2018 PR at 4852 meters: Guinn "The MJ#1 is a very important well for Israel"... "now drilling in the Mohilla Formation."
Shareholder Meeting Video - Guinn Operations Update- Paraphrased quote at 24:25 mark: "At 4,607 meters still had not reached geology of interest. Had not entered the (Mohilla) Triassic ."..."20 meters later we run into the (Mohilla) Triassic."..."We had 400 meters of prospective geology that we were really looking for".
Commentary: Apparently the Mohilla Triassic was deeper than thought prior to drilling as the planned TD was 4,500 meters and the Triassic actually started at about 4,627 meters. So 4-1/2" casing was added to the well design and drilling continued.
Statement from 4th Quarter 2017 report filled 3/12/2018 The well has also been cased and cemented in preparation for upcoming testing of multiple zones of interest, including zone(s) where free-flowing hydrocarbons were collected after circulating mud in the borehole.
Shareholder Meeting Video - Guinn Operations Update- Paraphrased quote at 27:05 mark: "First logging run, get to the bottom and come out of the hole no problem everything is great. Second logging run gets stuck. Run into an obstruction. Have to trip down to the bottom, another three days. Remove the obstruction. Go below obstruction another 1,800 meters and circulate the well. When we circulate the well we have oil that comes back. Praise God! That does not happen."
[img]Commentary: Guinn is genuinely very excited to tell this story. It's actually quite common for oil to flow to the surface under certain conditions. But, the conditions under which Guinn said they observed free-flowing oil gave evidence of MJ#1 being a gusher since he said "That does not happen". Also interesting that 4Q2017 report said oil was collected after the mud was circulated, so enough came to the surface to collect not just black patches mixed in the mud. Collecting oil would be important to test its properties. [/img]
Test Plan ZN said 3 primary and 2 secondary zones would be tested. The first and bottom zone was tested. Then zones 2 and 3 had to be combined for testing and they were referred to as "key zones of interest". This would account for the 3 original primary zones. That leaves 2 secondary zones for the Cretaceous and perhaps Upper Jurassic.
Given that the lower Jurassic had 1300 meters of high gas pressure and flow, and oil shows from a fractured carbonate reservoir, it could be that test zones 2 and 3 where located here. And since the fractured carbonate reservoir allowed vertical communication between zones 2 and 3, they had to be tested together. This theory is very good for gas and oil production from the lower Jurassic. Zone 1 would have been in the Mohilla and may have been a productive zone as well.
Reservoir Size
We are not geologists or engineers trying to collect data and size the reservoir. We are investors asking the question:
Is it reasonable that MJ#1 found a 1 billion barrel oil reserve since a reserve of that amount is what is required to supply Israel with its 250,000 barrels of oil per day requirement for 10 years. The 10 years is chosen since that is a typical horizon that oil companies like to keep out in front of their pumping operations. The reserve could be smaller or larger, but 1 billion barrels is great place for us to test in our due diligence.
Let's assume the 1300 meter lower Jurassic is the prolific oil zone and let the other zones be upside to the estimate.
The key parameters for calculating the reserve oil-in-place and recoverable amount can be taken from the 2015 report, the PRs while drilling, and some reasonable assumptions:
Reserve height (or depth) from PRs per previous discussion above, which is considerably larger than the 2015 report. The unexpected height of this formation may have been a significant reason the well's TD was lowered by 500 meters.
Net-to-gross is assumed to be 60% over the 1,300 depth since there is obviously good vertical communication between zones 2 and 3. But, all the depth is probably not reserve quality, so its not 100%. This is higher than the 2015 report.
Trap fill means the % of the potential trap voids that are actually filled with oil and water. This is higher than 2015 report, but is normal for a good trap, which the description would say MJ#1 found.
Porosity is assumed to be .24 since the reservoir has cracks, not just pores. This is higher than 2015 report. For reference, Ghawar is .35.
Water assumed to be 27% of total fluid. Not changed from 2015 report.
Formation volume factor is the shrinkage oil undergoes as it comes to the surface. Not changed from 2015 report.
Oil recovery is the % of oil-in-place that will be produced. Higher than 2015 report, but 1/3 is typical and this reservoir has high pressure which will help recovery.
Bottom Line With the parameter assumptions above, the recoverable oil is.....
1.2 billion barrels
Just from the lower Jurassic alone. The Mohilla might add to that number. Again, this was not done by a team of geologists and engineers who have access to the data. This was done by an investor who was asking is it possible that ZN found a reservoir big enough to supply Israel with its oil needs. And the answer is yes, it is possible by changing parameters from the 2015 report based on what was learned during drilling as extracted from PRs. Cut the estimate in third, then add something for the Mohilla and the result is about 0.5 billion barrels, which is very adequate starting point for supplying Israel.
