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KFG Resources Prepares for Seismic to Redevelop Salt Dome

In Mississippi, a few kilometers from the city of Natchez, KFG Resources (TSX.V: KFG) is about to try something that CEO Bob Kadane believes will create significant value for their companyâ € ™ s shareholders.

Buried in the Fayette field is the Fayette salt dome â € "the last hydrocarbon bearing salt dome of its kind in the region which has not been redeveloped. In February 2008, KFG will perform the first 3D seismic imaging investigation of the salt dome in which Fayette She holds a 100%. The seismic data will be analyzed with existing data from more than 100 well logs to determine best fifteen or more targets for a drilling program to be started this summer. The goal is to break through the oil and multiple formations of shallow gas in the Wilcox Formation (3500 to 3900) and lower - Tuscaloosa (9600 feet).

The salt domes as Fayette were deposited millions of years where the coast of the Gulf of Mexico were located far inland from their current position. As the waters evaporated, they left pockets of thick salt layers. Over the millennia, they were buried by sand, soil and sediments. Over time, the thick layers of salt in the center bowed upward and entered the existing layers of rock â € "where a â € € œdomeâ form structures. The salt is hard and impenetrable, bending up the salt formed traps or pockets where oil and the gas collected, often in large quantities.

There are many characteristics of salt located in the area around Natchez. While most were thoroughly explored and exploited from the 1930s until today, the Fayette Salt Dome has seen only Exploration Limited.

Of the 4,000 hectares that comprise the Fayette field and salt dome, only a fraction has been explored. Historically, exploration companies have drilled 29 deep holes on the east side of the dome. The west side, however, saw only eight holes to drill deep â € "which makes the west side on a priority target.

The problem with mapping the west side of the dome, Kadane says, â € œhas was that the holes drilling are too remote to draw logical conclusions from surface mapping (well logs). Some of them had small quantities production of oil and gas, so they could be near a larger untapped. These old wells are 1,000 to 2,000 feet distance and you could have a tank easy to run right between them and without even knowing it. And thata € ™ is what the seismic say us.â €

3-D seismic surveys, or "seismic" as they are commonly called, use sound waves to locate rock formations in the earth that are associated with oil and gas. Acoustic vibrations are created either by a controlled explosion, or more often by the use truck vibration punches the ground creating waves that radiate into the earth. The sound waves are reflected from underground rock, sediment, salt and other layers. The length of time it takes for the waves travel through layers of different densities is used to create a profile structure. With the use of computers, 3-D seismic have become incredibly detailed and complex. Billions of data points are compiled to create a three-dimensional picture of underground structures thus dramatically reducing the element of chance in drilling wells.

Then there are the well logs from more than fifty wells already drilled in Fayette. These logs are like electric cardiogram images representing one foot off the image of the types of hydrocarbons present in a well hole. With the log data, the presence of hydrocarbons is measured and in the borehole and liabilities of about 20 feet in all directions.

In addition, Kadane says 3D seismic signatures indicate areas of gas shallow and not depleted oil reserves undepleted. Altogether this adds up to a potentially enormous amount of hydrocarbons.

Although KFGâ € ™ s previous plans to recomplete its three existing wells Lower gas condensate Tuscaloosa have succeeded, they represented only the initial recovery of hydrocarbons from the Fayette field. With those online, the Fayette Field is currently producing 20 barrels of oil and 250 cubic feet gas per day. Kadane says these are just a fraction of what could be subsurface to be here.

â € œIf I walk away from this with only five successful wells, Iâ € ™ m going to be disappointed, Kadane says.â €

He stressed that any element like salt in the Gulf region which had a 3D seismic data used in conjunction with down-hole log data has been successful in finding new oil and gas in almost all producers horizon.

The Fayette Field is structurally similar to the oil company Denburyâ ™ € s (NYSE: DNR) many projects in Louisiana and Mississippi, including salt domes other Denbury drilled for primary recovery or pumped CO2 recovery secondary. Denbury is one of the largest operator of oil and natural gas in Mississippi and owns the largest reserves of CO2 used for recovery Oil is secondary to the Mississippi River. In recent years, Denbury has systematically acquired many of the known salt formations throughout the Mississippi and Louisiana.

â € œThese old production fields with salt features have been redeveloped by Denbury and others by doing exactly what Weâ ™ € re doing â € "3D seismic and well logs â €" and then the new drilling areas and traps to find new reservoirs, new fault traps, deeper beds, deep rivers. The reason there are still untapped, there is that using well logs alone didnâ ™ € t give a sufficient indication for the zones to be tested successfully for hydrocarbons.â €

Historically, more than two million barrels of oil and 8 billion cubic feet of gas were produced from training in Tuscaloosa Low-Fayette. Kadane points out that most of the historic production was from the eastern part of Fayette salt dome, which has seen most of the drilling.

â € œThere no reason I can see why the same or similar Wona t ™ € can be found on the west side, where only eight holes were drilled, â € he said.

While KFG focuses on non-operated drilling salt dome, there is another possibility worth examining also well. The model Denbury's CO2 using secondary recovery requires significant capital to start, but it is a very profitable model for that company. Kadane argues that the second model is that it is considering â € "once the company provides seismic data.

â € œIt has been an economic for companies like Denbury to revisit these old depleted reservoirs throughout Louisiana and Mississippi, â € Kadane says. â € œAnother of the 3D object is then to determine exactly where the old depleted reservoirs are so youâ ™ € know where to place your injection wells for secondary recovery project.

â € œWeâ € ™ ve already been approached by Denbury to sell Fayette and we would have done a JV, but I wasnâ ™ € t about to sell it. Thei € ™ ve done their homework € "they know Whatâ € ™ s there.as €

KFG Resources has 42,147,311 shares outstanding and net soon be trading at 0.09 $ Per share.

This article is for information purposes only and does not constitute a recommendation to buy or sell shares of any company mentioned herein. It is based on sources deemed reliable, but no warranty as to accuracy is expressed or implied. Opinions expressed in this article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.

About the Author

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