- Hard to brisk in a project is understanding what faced exploration that project resides. In this section, we will review the four levels an exploration project might exist and and how it affects its uncertainty and thus its risk. Exploration projects can be at one in four levels. The first level starts at basin identification. In areas that are mature, such as the continental United States, all of these basins have been identified. But more remote regions such as the Arctic, they have not even been evaluated to this extent. Once a basin has been identified, its oil and gas potention can be roughly defined by characterizing its petroleum system. In the early stages, the definition of this petroleum system may simply be a model defined by an explorationist based on various scanned data. Should this be the case, the uncerntainty is going to remain very high and as such the project very risky. This initial model can be matured and that's the risk lowered by conducting additional field studies or collecting either or seismic and gravity data to find out if your initial suppositions are correct. Now should early exploration turn positive, there may be a need for initial exploration wells. These initial wells will most probably be to test the basin sedimentation and not necessarily detest a particular project or prospect. Assuming work on the petroleum system provided a positive result, the next step is to define one or more play types. At this stage, as minimum a course grid of seismic data will have been acquired. This is needed to define sub-surface features that could act as traps. There will also be initial economics run to determine if the plays that have been defined provide projects that would be economic. Finally, we get to prospect stage. This stage can further be divided into prospects and leads. The difference between these two elements will be explained later in today's presentation. The remainder of this presentation will dig deeper into the four levels that have been now defined for exploration. Due to the maturity of worldwide oil and gas exploration, it's rare to find one in a position where you're looking at an entirely new basin. Saying that does not mean that it never happens. There are remote locations in the world where exploration for hydrocarbons has yet to occur. If one finds an opportunity to be investigating a totally unexplored area, they must remember that all key elements required for a successful petroluem system must be in place. There must be a sedimentary interval with sufficient organic content that has matured to the point that hydrocarbons have been generated and expelled. There must be a logical pathway for those hyrdocarbons to migrate from the source rock into the section that is going to act as the reservoir. And that reservior interval must be in such a position that the hydrocarbons that have migrated into it are sealed thus trapping. Finally, all these elements must take place in such an order that a successful trap has been filled with hydrocarbons. Defining an area to have these properties and thus creating a play, is no small task and will not happen overnight. This sort of exploration is long term and high risk. But it also has potential to generate projects that can reap company making rewards. The cross section over a hypothetical basin model shown at the bottom of this section is a scenario that represents a successful petroleum system. Note that the multiple geologic elements previously mentioned are in place in such fashion that hydrocarbons have been generated, migrate, and are then trapped. One can imagine the amount of time and work that would be required to adequately define this model in a real world setting. In an upcoming slide, we will further review our model in map form. A play is a specifically defined petroleum system that if correct, would lead to a successful discovery. Once a play has been defined, further exploration activity will take place to determine if the assumptions made are correct. These activities normally include the aquisition of the additional sub-surface data in the form of seismic or gravity data, additional field studies, and the interpretation of data such as satellite and the like. It needs to be mentioned that new plays can be developed in already mature basins. Just because one play has been tested in an area does not mean new ideas can't be brought forward. These new plays might be in deeper or shallower targets. They might be in different trap stalls or different parts of the basin. A good example of a new play in a mature basin would be the deep water Gulf of Mexico which was not discovered until tens of years after the shallow water section had already been developed. This slide is mapped with a hypothetical play. The cross-section shown in slide three of this presentation is a west to east profile across the center of this map. What we've highlighted first is the area that contains the entire petroleum system. This is the greater area that contains all elements required for this play. The next area highlighted is the source rock. This would be the area that contains sediments with sufficient organic material or total organic carbon to generate hydrocarbons. Remember, though, that just because the sediment package contains sufficient organics to generate hydrocarbons does not mean those hydrocarbons have been generated. The next area highlighted is that portion of the organic interval that has reached sufficient temperature and pressure limits such that hydrocarbons have been generated. This would be known as the kitchen. The reservoir interval is the next unit highlighted. Note on this map that is shown to be interdigitating with the source interval. This is to provide a better view of the relationship between the source and the reservoir on this map. If you go back to the cross-section in slide three, you'll note that the reservoir is shown to overlap the source interval. This geologic configuration would be considered to be the most simplistic, most efficient, for hydrocarbon migration and is unfortunately very uncommon in real world geology. The migration pathways are shown next. This is the logical migration pathway from the deeper higher pressure areas of the kitchen with the hydrocarbons that have generated to the shallower lower pressure areas updip to the east. The location of the structural traps are shown next. These will be the structures that trap the hydrocarbons that are migrating from the kitchen in the high energy to the west that are migrating to the east into the lower energy area. Finally, the deposition of the overlying seal which will need to be in place prior to the trapping of hydrocarbons. And finally timing. Which is mentioned last but is equally as important as any of the other geologic patterns. So, this is our play. This is the geologic concept that has been defined by our explorations for the area to allow the significant quantities of hydrocarbons to be trapped in our petroleum system. We have defined all of the elements required for prospect via our play definition. We now need to actually define one. As mentioned, the prospect category where we define a specific location is divided into two sub-categories. First leads and then prospects. A lead is defined as a specific geologic area where a prospect might exist. A lead requires further work to better define the geologic elements and thus mature it from lead to prospect status. To have a lead, basic mapping and volumetrics will have been completed. For both leads and prospects, a volumetric range, not a specific value will be calculated. In a later presentation in this series, methods for defining these ranges will be discussed. Now, based in part on this volume range, determination of it features economic viability will then be defined. If the lead volumetric calculations make economic sense, the remaining risks and uncertainties associated with that lead will be defined. After determining these risks, a work program will be developed to address each element with the goal of reducing the uncertainties and thus raising the lead to prospect status. A lead is matured to prospect status when all geologic work has been completed and the feature is ready to be tested with a drill bit. Mapping has been refined. Volumetrics have been refined using the most up to date maps and all elements concerning features geologic chance of success or GCOS, have been addressed using all available data. A full set of preliminary economics have been completed and the prospect meets management's thresholds. One final comment is to emphasize that each individual prospect should have its own GCOS or level of uncertainty defined and documented. It is not only possible, but common to have a suite of prospects available with varying GCOS and economics. As an example, you could have a small prospect in a well understood area with a lot of analogue data, good quality seismic, thus low uncertainty, and high GCOS. But unfortunately due to the maturity of the area, it also has minimal economic upside. Next, you have a large prospect in a relatively new area. But due to the fact that it is a new area, uncertainty is high, the GCOS is low, but the relative potential economic upside is very high.