Operations
CYGAM OPERATIONS:
ITALIAN PERMITS:
B.R.268.RG (Miglianico East) Permit
Vega has a 60% working interest in this permit which is located offshore Italy, in the Adriatic Sea, at the southern end of the Central Adriatic sedimentary basin. The permit is 126.68 square kilometres in size (31,302 acres). After a preliminary approval granted on December 20, 2001, the block was officially awarded to Vega on March 24, 2005, for an initial six-year term. Within 48 months of the formal award, Vega will have to undertake geological and geophysical studies, acquire and/or reprocess approximately 150 kilometres of seismic data, shoot a potential 3D seismic program and commit to drill a well to a planned total vertical depth of 4,500 metres. The Company has already committed to purchase approximately 300 kilometres of seismic data which will be re-interpreted and re-processed in Calgary in the next few months.
In the central portion of Italy, the Marche-Abruzzi Basin has high potential for relatively shallow gas. In the same basin, Mesozoic carbonates also have excellent oil potential. The oil can be either of light gravity (34-37 API) as in the onshore Miglianico field which is immediately offsetting Vega’s permit or heavier as in the offshore Rospo field, located approximately 40 kilometres south-east of B.R.268.
Preliminary seismic and geologic interpretation indicates the presence of two large structures on the permit as depicted in Figure 2. The Miglianico East anomaly is believed to be an asymmetrical faulted anticline, structurally higher than the Elsa 1 anomaly, and appears to be on the same trend as the onshore Miglianico 1 and Miglianico 2 wells which tested significant quantities of light crude oil. The Miglianico 1 well, which finished drilling operations on January 15, 2001 at a total depth of 4,966 metres, tested 2,500 bbl/d of 34° API oil with 3.5 mmcf/d of gas. The Miglianico 2 well, which finished drilling operations on April 15, 2003, at a total vertical depth of 4,925 metres, encountered a similar section and tested 1,750 bbl/d of 34° API oil with 1 mmcf/d of gas.
The Elsa anomaly, where the offshore Elsa-1 well was drilled in 1992, is also a sizeable structure which warrants further assessment. The Elsa-1 well recovered a small amount of 12° API heavy oil (contaminated) upon reversed circulation and, during the last phase of production test, produced a spontaneous flow ranging from 13°-15° API (possibly still contaminated). Management believes that this test was not indicative of the type of oil present in the reservoir and that the well was prematurely abandoned due to the low oil price at the time. Pending final seismic interpretation, the Elsa-1 structure will likely warrant further drilling.
The primary objective of the B.R.268 Permit is the Cretaceous Maiolica Formation (Tithonian turbidites) which typically has a porosity of 18 to 19% and permeability of 10 to 100 millidarcies. The Cretaceous Scaglia Formation, at an approximate depth of 3,000 metres, offers a secondary objective. Other likely reservoir rocks include Jurassic turbidites of the Massiccio Formation.
Water depth in the Adriatic Sea is about 30 to 50 metres and a total drilled depth of about 4500 metres would be required to test all objectives. Both the Miglianico East and Elsa structures, if filled to the spill point with hydrocarbons, could hold significant volumes of oil and gas.
Vega recently signed a Joint Venture Agreement with a London AIM listed company which will pay 60% of well costs to earn a 40% working interest in the permit. The Company may still farm-out a portion of its interest on similar terms and intends to remain the operator for the permit.