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Magellan Prepping Williston Basin EOR Pilot Program

Magellan Petroleum Corp. recently received permits from the U.S. Bureau of Land Management (BLM) to drill five wells on its leases at Poplar Dome in Roosevelt County, MT. The permits were the final requirement before the company can begin drilling for its CO2-enhanced oil recovery (EOR) pilot program.

Poplar, located in the Williston Basin, lies at the western edge of the Bakken oil play. It is near two oil pipelines and one gas pipeline.

Magellan also recently signed a CO2 supply contract with Air Liquide Industrial U.S. LP for the CO2 necessary to conduct program for about two years.

With the program the company is targeting the Charles formation at Poplar to increase production and validate the reserves potential of the tertiary recovery technique on a full-field basis. With drilling permits obtained and a CO2 supply secured for the pilot, the Magellan has begun drill site preparation work, and drilling is expected to occur between now and November.

"Based on our own work, the production history of the field to date, and reference to analogous CO2-EOR projects in the Williston Basin, we believe that the Charles formation at Poplar has 500 to 600 million bbl of oil in place and the recovery of an incremental 10% of this amount is an achievable objective," said Magellan CEO Thomas Wilson.

The Company's current plan is to arrange the five pilot wells in a "five-spot" pattern, with a single CO2-injection well in the center surrounded by four producing wells. All five wells will be vertical and drilled to a depth of about 5,800 feet. CO2 injection is expected to commence in October. From the time of first injection Magellan expects that it will take 12-15 months to evaluate the effectiveness of CO2-EOR and announce conclusive results from the pilot.

"After more than two years of extensive engineering, modeling, and laboratory work, we are very excited to begin the process of proving the technical and economic viability of CO2-EOR at Poplar," said Wilson. "...[W]e hope to demonstrate that the implementation of a full-field CO2-EOR program at Poplar could result in the recovery of approximately an additional 50 million bbl of oil.

 The estimated cash cost of the pilot, including capital and certain operating expenditures and the cost of CO2 over two years, will be about $20 million, with most of these expenditures incurred by March 2014.

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