Givot's Premature Oil Production Near Rosh Ha'Ayin, Israel

burning-man-rigGivot Olam Oil Exploration LP push to production without reservoir report or stable production rates.

In the face of serious climate change, Israel’s Petroleum Law (1952) encourages haste where oil is concerned. We’ve seen it at Adullam, where IEI plans to rake up the earth for oil shale, and now we’re getting another taste of it just outside of Tel Aviv. Givot Olam Oil Exploration LP has discovered oil near Rosh Ha’Ayin, and plan to begin assembly of production facilities by August 15, 2010.

According to a recent Globes report, “Givot Olam Oil Exploration LP (TASE:GIVO.L) announced at the close of trading yesterday that there were commercial quantities of oil at its Meged 5 well, and that the partnership intended to prepare for production at the well.”

Incomplete assessments

This despite the fact that the partnership has not yet announced the total size of the reservoir, which details will be released 15 August, nor do they have a secure estimate of how much oil will be produced at the site.

Givot told Globes that “during 189 hours of flow during the intermittent production tests at the well between July 4-20, the well produced 3,015 barrels of oil, which also contained gas. The gas was equivalent to 90 barrels of oil a day, which when added to the oil production enhances the commercial viability of the well.”
However, they are unable to confirm the production rate, noting a potential 50 barrel fluctuation each day. The partnership claims that production is unstable because the well bore has not yet been properly cleaned.
They expect to finish cleaning the well bore on Monday, after which the testing equipment will be sent home and replaced with production equipment by August 15th.
How much is enough?

Furthermore, Givot admitted that flow rates from sections 1-6 of the well were lower than predicted, citing “geological factors and the circumstances of the equipment and devices used in the tests,” as an explanation. According to a Globes’ source:
This is a commercial well that is worthwhile to go into production, but it won’t turn us into Saudi Arabia. Givot did not state the total size of the reservoir as it’s waiting for the engineering report. I predict sales of shares tomorrow, because the market expected a flow of 500-600 barrels a day. The numbers are close to expectations, but there’s no indication of the total size of the reservoir, and that’s problematic.
Share prices did drop 14.7%, but more importantly, the partnership’s rush to extract oil despite shortfalls in preparation is a serious concern. And although Givot believes their well is worthy for production, we disagree. In these days of economic and environmental uncertainty, the Meged 5 well seems like a dangerous drop in the bucket.
More Oil and Gas News in the Middle East:

[image via aturkus]

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