Value Microcaps Motherboard

[Bobwins]

Marvelmeister re TGA

VPI/TGA partnership has moved fairly slowly on Harmel. They have known about the oil and size of field for several years. I think the rise in the price of light sweet crude made it look they could make it even if they had to sell it at a lower price. Then the latest perceived crunch forced Saudi Arabia to play their trump card and prove their ability to be the supplier of last resort. They had to pump heavier, sour crude because that was all they had left in reserve..

This action, while overwhelming capacity for the heavier crude and reversing the price rise, did expose the myth of unlimited supplies of light sweet from the Saudis.

In the process they choked refineries with sour heavier crude and there is now a bigger gap between light sweet and medium heavy. If the gap increases, the economics of Harmel will dim. I also have a feeling there is some technical issue in getting the Harmel oil to flow. They had done a lot of testing on these wells, considering they are relatively shallow and low output. I think there is some worry that the wells will not flow consistently for long periods of time.

Harmel still remains a very large reservoir of oil. If it was in Texas, there would be whooping and shouting. Being in Yemen with additional pipeline, tanker, transportation costs, means that they have be careful before commiting scarce capital resources on Harmel, even though it's large.

I would guess that medium heavy crude is in the low to mid twenties now. Of course once the pipeline is done, all the oil from An Nagyah, Harmel and any new fields will be mixed together and TGA will get paid on however the blended oil tests out. Apparently mixing the oil from different sources is pretty simple and I assume the oil is periodically tested as it comes out of the pipeline to determine the quality and the resulting price to TGA/VPI. I am encouraged that VPI, who is very cautious, has gotten enthusiastic about Harmel in recent presentations. I think it's going forward one way or another and that's good news for TGA. Whether it's a bonanza or a nice add is the big issue. Tune in 18 months from now to find out the answer!! Bobwins