Columbia: PetroSouth, Barco, Standard Oil, Texaco, Socony-Vacuum

This report came across the Canadian Newswire about a company acquiring exploration assets in the country of Columbia.



The news-release states:


"PetroSouth Energy Corp. (the "Company")(OTCBB:PSEG), an energy exploration and production company focused on high-impact energy prospects in Colombia, South America, is pleased to announce the acquisition of a 6% working interest in the 64,000-acre Carbonera Exploration and Exploitation Contract, and participation in three future exploration wells."


and further states:

"The 6% working interest was acquired for US $420,000 and other considerations from Omega Energy's exploration block located in Catatumbo Basin region of northeastern Colombia. The operator of the Carbonera Contract is Well Logging Ltda. Fulfillment of the first Phase contract commitments (Phase 1 re-entry of Cerro Gordo-1) was met prior to the Company acquiring the 6% working interest. Pursuant to the terms of the Contract the Company will participate with drilling one exploration well in each of Phase 2 (12 months -April 28, 2008), Phase 3 (12 months - April 29, 2009) and Phase 4 (12 months -April 28, 2010). The Cerro Gordo-1 well was originally drilled and abandoned by Texaco in1989. The well was re-initiated (re-entered) by Well Logging Ltda. in thesouthern part of the block in June 2007. It was proven productive after aone-week test. The Cerro Gordo-1 well flow tested a combination of gas andcondensate at Gas: 4.0 MMCF/Day and Condensate: 60 BBL/Day."


The region encompasses the Catatumbo River basin and it begins northern Columbia, in the department Norte de Santander. It flows northeast across the Venezuelan border, and crosses the rich oil-bearing regions in the Maracaibo Lowland, and empties into Lake Maracaibo after following a course of about 338 kilometres. It is navigable in its lower course and receives more inflow from the Zulia River 6 kilometres west of Encontrados, Venezuela in the Maracaibo Lowland.

The Catatumbo Basin is a subbasin, forming the southwest flank of Venezuela's prolific Maracaibo Basin. It is bounded to the west by the Santander Massif (hence the department name of Norte de Santander) and the Sierra de Perija and in the south and southeast by the Merida Andes. The eastern boundary is defined by the Venezuelan border with Colombia. In Venezuela, this basin has already produced several billion barrels of oil, and individual producing fields there range in size up to more than 800 million barrels of oil recovered to date.

Oil exploration in this area began in the thirties, with initial exploration activity taking place in Tibú field. By 1941, the field was in production as part of the Barco Concession (see footnote below), operated by Colpet. In 1977, Ecopetrol assumed the operation of the field, and after the concession reverted in 1982, all the rights to income after royalties went to Ecopetrol.

As we can tell, there are prolific fields in Columbia. The news-release provides a good summary of the region and neighbouring fields:

"Immediately adjacent to the Carbonera Block lie fields such as Tibu,found in 1940 and with 260 million barrels produced to date, Petrolea,discovered in 1934 with 38 million barrels produced to date, and Rio Zulia,dating from 1962 and with 137 million barrels recovered to date."

There are many attractive reasons to do exploration in Columbia.

January, 2004, marked a change in the way Columbian Government decided to conduct business with regards to regulatory and fiscal policies intended to encourage oil industry investment in the country. Some main points, including security, are:

• The hydrocarbon potential of the country is significant in terms of the overall economy and much of it remains untapped due to alack of investment in the last 20 years.
• Fiscal terms were revised as of January 2003, making Colombia an attractive country in which to invest in the oil and gas industry. These fiscal incentives increased the share of revenue which an investor could obtain from 27% to up to 50%
• Colombia has a stable economy, with low inflation and consistent economic growth and, due to the fact that it has never defaulted on a debt payment or breached a contract with foreign investors, is a favored location for direct foreign investment.
• Colombian authorities provide essentially unlimited access to all technical information on oil and gas blocks.
• The security situation in the country, which has long hampered exploration, has improved significantly and is expected tocontinue to improve.

With the work being done by PetroSouth, we are seeing how a junior is working in another country that we do not often associate oil and gas with. They are growing their business one step at a time, taking educated risks and looking for a well-planned return on investment - not an immediate one, but one down the road.

You can't track oil stocks based on their Quarterly Reports. In my mind (opinion), that is bad business and bad analysis. Look at long term. Consider the fact that finding the fields and the exploration involved can take many years. Then consider once the field is proved productive, setting up the production facilities, then the pipelines - we are looking at easily 10 year span to bring most fields in remote regions to fruition. The infrastructure takes time, and even pipeline companies and operators want to know there are consumers for the oil or gas, before investing in the country and making large commitments.

My advice, don't play oil stocks on the short term (i.e. quarterly), but on the long term prospects and continual growth of fields coming on line. This is how juniors operate and slowly they'll become the new majors.

A Footnote: A Little History from Time magazine about the Barco Concession




Quoting from a Time Magazine article about the Barco Concession, we see an interesting story of how oil exploration, Standard Oil, Gulf Oil and others played a part in building Columbia's oil history.

An very good read, enjoy the article below:

"Time Magazine, Monday, October 30, 1939

In A. D. 1907 General Virgilio Barco of the Republic of Colombia turned up in Manhattan. He had in his back pocket an oil lease to 1,200,000 acres of his native jungle—a gift to him from a grateful country. No fool, he went straight to No. 26 Broadway, office of the late John D. Rockefeller. Standard Oil's guards took one look at the general's Latin getup. He never got in, and until last week no oil ever came out of the Barco concession.

For 29 years the concession was juggled like a hot potato. Virgilio sold it to seasoned Promoter Carl Kendrick MacFadden's Carib Syndicate (25%) and Henry L. Doherty's Cities Service Co. (75%). Cities Service faced 250 miles of steaming, mountainous jungle between the Barco and the Caribbean, and gave up. In 1926 it finally sold the concession to the late Andrew W. Mellon's Gulf Oil Corp. Then the Colombian Government put its oar in, canceled the whole concession.

Out of Colombian courts and politics five years later came the Barco concession revamped: Gulf Oil received a 50-year contract calling for construction of a pipe line to tidewater and payment of a 3½% royalty to General Barco's successors, 6% to Colombia on all oil delivered there. Gulf sank twelve wells, and a lot of money. There was oil there, but the cost of getting it out was appalling. In 1936 not one barrel of Barco oil had yet reached the sea when testy, ribald, Norwegian-born Torkild ("Cap") Rieber, The Texas Corp. chairman, finally shelled out a cool $12,500,000 for Gulf's "white elephant." He took Socony-Vacuum Oil Co., Inc. into a 50-50 partnership and for $2,050,000 bought Carib's minority interest. That done, Cap Rieber settled down to one of the toughest engineering feats in the history of his industry: piping oil from the Barco to the sea.

Last week Barco oil oozed from the end of a 263-mile pipe line at the new-built Colombian port of Covenas. It was not black like much U. S. oil but bright green (it looked golden in the sun). Hove to in Covenas harbor, the Texaco tanker Nueza Granada and Socony-Vacuum tanker Altair began to fill their cargo tanks with the first Barco oil for transport to an unnamed foreign crude buyer.

To hardheaded, steel-willed Torkild Rieber (57), once a tanker captain himself, the tough job's end was a triumph. Construction began in February 1938. There were no roads, and the rainfall was terrific. With a fleet of six trimotored Fords, a Lockheed and two Stinsons, engineers flew in, piece by piece, tractors to cut jungle roads, suspension bridges to span the rivers, power plants, refrigeration plants, pumping stations, cement, concrete mixers, food, and 263 miles of twelve-inch steel pipe. In all, 11,000,000 lbs. of freight went into the jungle by air. One plane with its crew of two flew into the jungle and disappeared for good. Eight other men died on the job—transfixed by arrows of the Motilone Indians (a short, husky, irascible tribe who dress in rancid alligator grease to keep off mosquitoes and hang their dead from the ceiling to rot).

From the Petrolea pumping station at the Barco field the pipe line snaked up 5,400 feet over the Eastern Andes, then down through miles of rotting jungle to the sea, thrice crossed the Magdalena River or its branches. It cost Cap Rieber and Socony-Vacuum a cold $40,000,000 ($18,000,000 for the pipe line; $22,000,000 for development work). "Hell!" says Cap Rieber, "if they wanted to move the Chrysler Building to Colombia, we'd do it —if they'd pay us for it."
Today 25,000 barrels of Barco oil flow daily through the pipe line. Next year they expect to step that up to 50,000, with an eventual top of 70,000 barrels after all seven pumping stations are in. The oil yields 49% gasoline on straight run, double that under cracking processes (ordinary black oil yields no better than 24% gasoline on straight run). How much of it lies hidden in the upper Catatumbo basin nobody knows. The companies have until August 1941 to stake out their final claims. Then half of the Barco reverts to the Colombian Government.

To Texaco and Socony-Vacuum the Barco oil is welcome. Both sell overseas (there is a 21¢ tariff on oil imports to the U. S.) and neither has enough oil for its distribution system. In a warring world they will doubtless find buyers for their Colombian oil, but may bring it to the U. S. to be refined. Last week old Virgilio Barco was many years in his grave, but his son Jorge (pronounced Horkhay) Barco, in Cúcuta, had himself a few drinks as the royalties began to accumulate."

Nigeria: More Trouble in Central Africa for Oil Companies

Though I've written about the small companies and their exploration activities, events happen in many countries where exploration and productions happens. It does not matter the size of the company. It can happen in any country. The wrong place at the wrong time.

An example came from Eni today.

Quoting the Press Release on the Eni site.

Nigeria: attack to FPSO Mystras vessel

October 26, 2007 - 13.10 pm

The attack occurred today at dawn some 85 km off Nigerian coast. Attackers managed to climb aboard the FPSO Mystras and seized six workers, whose nationalities are Polish and Indian. Another Nigerian worker is reported to be slightly injured at one leg. Eni will provide further details as soon as available.

October 26, 2007 - 11.06 am

Eni informs that today 26 October, around 7 am Italian Time, some speedboats carrying unidentified gunmen assaulted and jumped aboard a supply vessel nearby the FPSO Mystras. Attackers also tried to climb upon the Mystras itself without success. No one has been reported to be injured so far. Eni will provide further details as soon as available.

(*) FPSO (Floating Production Storage and Offloading), is a vessel for production, storage and offloading of crude oil.

Over the past few months there have been several hostage takings in Nigeria. It is matter of fact of doing business in this country - everyone going there as an expat knows it and should expect it. As an expat who has lived abroad, you know that when you accept the position overseas or elsewhere, that it is not your backyard. You are in a different country with a set of different laws and different lifestyles and different governments.

Fortunately, the past incidents with kidnappings have been resolved peacefully; though the full details are never released, and this is good news for Eni and the current hostages.

Eni has been operating in Nigeria for quite sometime and has worked in many countries. No matter how much you plan for the unexpected, something can happen that no one can see coming.

We hope that they will be released soon.

Vanco: Ukraine opens deepwater Black Sea

An interesting article about the Ukraine and their oil and gas industry, shows that another small company is leading the way in developing new areas for exploration.

The government of Ukraine has signed the "Prykerchenska Production Sharing Agreement" with Vanco Energy Co. This agreement gives Vanco the opportunity to explore the deepwater part of Ukraine's Black Sea and to develop the Prykerchenska block (I've attached a map).

This effort came to fruition this month (October 2007) after over a year and half of negotiations with the government and all parties involved. There were setbacks, but this is attributed to the Ukraine negotiating their first Production Sharing Agreement and the length of the agreement. The agreement has a 30 year term and will allow Vanco to start exploration and eventually build production facilities.

For the Ukraine, this is one method of solving Ukraine’s energy needs and it could help the country fulfill its goal of producing 25 percent more gas within the next 20 years.

The Kremlin in the past has unexpectedly doubled the price Ukraine pays for gas at the border in 2006 and then raised it again by a third this year. The Kremlin seems intent on making it's former member states pay more for their energy needs.

The Ukraine is actively pushing for exploration to sever the ties and is working with other Western Based companies to do this. Recently this year, on June 5, 2007, Ukraine’s state-owned oil and gas company Naftogaz Ukrainy and a subsidiary of the US-based Marathon Oil Corporation inked a cooperation agreement to explore for hydrocarbon deposits in the country’s Dnipro-Donets Basin, which supplies Ukraine with 80 percent of its hydrocarbons and is believed to contain natural gas deposits deep below those being exploited

Vanco is unique in that it has been dedicated to international deepwater exploration since 1996. This company has succesfully operated offshore drilling programs in Morocco and Côte d'Ivoire in the last three years. In addition to Ukraine, the Houston independent has deepwater exploration programs offshore Gabon, Equatorial Guinea, Ghana and Cote d'Ivoire.

This is an interesting story of an ambitious company and how local politics and want or a desire for independence can lead to opportunities for a nation and explorers.

Fugro: Pipeline Survey between Algeria and Italy

As North Africa gains in importance for it's natural gas exports to Europe, links are being made between the two continents.






Recently, on Rigzone, Fugro announced that they've "been awarded a contract to perform a detailed marine survey in the Mediterranean Sea to select the best route for the GALSI gas pipeline from Algeria to Southern Sardinia, and then from Northern Sardinia to the mainland of Italy".






Fugro will be using their vessel, the Geo Prospector (pictured on the right) and their geotechnical vessel, the Bucentaur (pictured on the left) - a drillship to do geological sampling.

The work is being financed by a group of companies, under a Joint Venture named Galsi S.p.A and includes the following companies:

1. Sonatrach
2. Edison
3. Enel
4. Wintershall
5. Hera
6. and the Sardinian company Sfirs.

Reading through the above Wikipedia corporate description of Galsi S.p.A, it can be seen that Sonatrach has the largest percentage, 36% and that Russia's Gazprom may potentially have an interest in the company and pipeline as well. Again, a there is a good mix of National and Independent's working together.






As developed countries look to do more business and as North Africa opens its doors to exploration, more and more links will be made. This pipeline begins in the middle of the Sahara and ends near Tuscany, Italy. Wikipedia describes the route as:





"The pipeline will start from the Hassi R'mel field in Algeria and the 640 kilometers long first section will run to El Kala at the coast of Mediterranean Sea. The 310 kilometers long offshore section with two legs will be laid between El Kala and Cagliary, Sardinia."





I worked in Hassi R'mel when I was in Algeria with Schlumberger and can definitely say Algeria has potential to become more a power in North Africa, if it follows Libya and Tunisia's model and focus on building a solid infrastructure and employing more locals. The oil infrastructure is a start, the next step is the roads, the sewers, and promoting a safe work environment. In the end though, I would return to Algeria and Hassi R'mel in a heart beat, as the people I met and Sahara desert is definitely a place to visit and experience.






Eni has been making investments in North Africa, mainly in Libya for the last quarter of a century. There is this very recent Press Release which states clearly that Libya's NOC and Eni "will continue to explore the prolific NC41 offshore area, and strengthen the hub of Mellitah by expanding gas export capacity from 8 to 16 billion cubic meters/year"






Expect over the next few years to see more positive news coming from North Africa.

Malaysia, Brunei - No More Gunboats?

An interesting article appeared on Rigzone about the importance of knowing your location and your boundaries, especially when you have quite a few neighbours interested in the resources.

Essentially, Malaysia and Brunei are close to reaching an agreement over a maritime boundary dispute that has caused some headaches for oil and natural gas exploration in an area west of Borneo Island since 2003.

1. Why is this area of interest?
2. Who is laying claim to the islands?
3. Where are they?

A good summary from the article states: "At stake is a so-called deepwater area, near where several oil and gas fields have been discovered by both sides in recent years. Malaysia's state-owned Petronas in 2003 awarded two upstream acreages in the area, which it calls blocks L and M, to U.S. independent Murphy Oil Corp. (MUR), a year after Brunei had awarded nearly identical areas under its own licensing around.The tiny sultanate signed off block L as block J to a consortium headed by French oil giant Total S.A. (TOT), while a group led by oil major Royal Dutch Shell PLC (RDSB.LN) secured block M as block K."

Spratly Islands

These islands, known as the Spratly Islands, are a tinderbox in a climate where oil and gas exploration can help turn around the economies of many countries.

The Spratly Islands consist of 100 - 230 islets, coral reefs and sea mounts (tablemounts). This archipelago is spread over 250,000 sq km of sea space, and yet the total land mass of the Spratly Islands is a mere 5 sq km. None of the land is arable. Until recently, the Spratly Islands have not been occupied by humans. Presently, the countries with territorial claims are now using military means --airstrips and armed forces -- to reinforce their claims

The Spratly Islands are situated in the South China Sea -- one of the largest continental shelves in the world. Typically, continental shelves are abundant in resources such as oil, natural gas, minerals, and seafood. It is etimated that oil and natural gas reserves in the Spratly region are estimated at 17.7 billion tons; Kuwait's reserves amount to 13 billion tons. The Spratly reserves place it as the fourth largest reserve bed worldwide.

The UN Convention on the Law of the Seas article 55 and 77 play an important role in determining ownership of these rights. Article 55 establishes the EEZ (Exclusive Economic Zone), while Article 77 defines a countries continental shelf.

Under Article 121(3) of the UN Convention on the Law of the Sea (UNCLOS): "Rocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf." Unfortunately, UNCLOS provides no further guidance as to how a 'rock', capable of sustaining a claim to a 12nm territorial sea and a further 12nm of contiguous zone, should be distinguished from a fully fledged island with continental shelf rights and an EEZ of up to 200nm breadth. Many of the 36 Spratly 'islands' would seem to fall more readily into the category of 'rock' rather than 'island' - providing fertile ground for dispute even were the sovereignty issue to be resolved.

Overlapping claims resulted in several military incidents since 1974 and in several countries awarding foreign companies exploration rights in the same area of the South China Sea.
Claims to the various islands in this archipelago started as early as the 1930s. Since the late 1950s, 29 oil fields and 4 gas fields in the Spratly region have been developed.

An EEZ and Firing Shots?

In the winter of 2000, Brunei said it would begin to offer exploration blocks after declaring an EEZ (Exclusive Economic Zone) , giving it rights to fishing grounds and mineral extraction from the sea bed.

In May 2007, Malaysia, not happy about the dispute, the claim, and the EEZ, decided to fire some warning shots to remind Brunei, which is tightly wedged between Malaysian territory on Borneo island, of its claim by sending its navy to chase off a drilling team from Total. Malaysia, which has had territorial disputes with all its neighbours, argues Brunei only has jurisdiction over its continental shelf, in water up to 200 metres deep. About three quarters of the EEZ is in deeper water.

As any one watching world politics would expect, both governments are keen to keep this dispute under the radar of any observers and potential investors in the area. Brunei, a very small sultanate, has only 330,000 people and no army.

Redraw the Map?

"The leaders discussed the long-standing issue of maritime delimitation, on which both sides have put forward new proposals, and agreed on the need to resolve the matter urgently," the leaders of Malaysia and Brunei said in a joint statement.

There is now the potential idea to redraw the map. The idea being, that once the map is redrawn, any and all the competing oil claims could be sorted out.

Redrawing the sea border would be a departure from the more pragmatic solutions reached in some previous oil disputes,where countries have agreed to jointly develop oil from a contested area rather than tackle the primary issue of sovereignty.

Is Han's Island similar? A Russian Sub at the Pole?

As one can tell, this is an interesting case study of the UNCLOS, EEZ, the continental shelf, and boundary disputes.

Redrawing a map is an interesting solution to this dilema in the South China Sea, but as one can see with the current Russian submarine trip to the North Pole, disputed by Canada, Denmark and the United States. Ownership of these 'rocks', the contential shelf, can lead to diplomacy by gunboats.

Canada and Denmark have been planting flags and making trips to little Han's Island which is located between Baffin Island and Denmark.

Time will tell how these situations resolve themselves, but it shows the importance of boundaries and being able to get along with your neighbours.

Lining up for Exploration: NOC's and IOC's

Some interesting news came across the Dow Jones Newswire and can be found on Rigzone about some offshore blocks off of Columbia.

The Libyan's are also have bidders line up for some blocks as well. The MMS just recently completed some bids for blocks over the past few months for the Gulf of Mexico (GOM).


As more and more National Oil Companies (NOC's) move further away from their homelands, they are treading into the waters of the Independent Oil Companies (IOC's) and gradually reshaping the way oil is being found.


New partnerships are being formed and as we are seeing what is being done in Venezuela and Russia (the nationalization of resource companies), these NOC's are now being seen as new powerhouses.

In the past, Norsk Hydro (or Hydro) of Norway, was one of the few NOC's that explored abroad, outside their own boundaries. Even in the Gulf States, Dubai, for example, has recently purchased some heavy oil land and companies in Canada.

So how does that affect us? National Oil Companies do not strictly operate on market principles alone. Because of their close relationship to their respective government, they may have other objectives, such as wealth distribution (Venezuela - PDVSA), job creation, economic development, and energy security. Whereas the IOC's are concerned with market values and returning a good share price for their investors.

Two different motivations.

In 2006, five of the top ten companies could be considered state-owned and operated. That seems to be a decent ratio of private to state - 50%.

An interesting paper was published by the Federation of American Scientists concerning this very topic.

Looking at it another way, based on reserves in 2006, the top ten producing companies would all be state-owned and includes the following:

1. Saudi Aramco
2. NIOC
3. INOC
4. KPC
5. PDVSA
6. Adnoc
7. Libya NOC
8. NNPC
9. Lukoil
10. QP

As with every company involved in E&P, their ability to be profitable for either their shareholders or the state-motivations, depends greatly on technology and where they are exploring.

In the article on Rigzone concerning the exploration bids for Offshore Columbia Blocks, one notices that several of the companies involved are state-owned and now working with the major independent's, such as BP.

By working with the independent for-profit companies and through production sharing-agreements (PSA's), it allows the state-owned oil companies to access new technology.

It will be interesting to see how the next few years plays out and the courtship between NOC's and IOC's continues.

Kenya: Lundin Petroleum building on the Anza Basin

When people think of Africa and oil and gas, they most often think of the oil producing nations of Angola and Nigeria, along with the gas producers of Algeria and Tunisia. East Africa is not often thought about as a producer.

Kenya’s Petroleum potential is best depicted by the four large sized sedimentary basins that straddle the Country (I've attached maps from the National Oil Company of Kenya - NOCK). The four basins are the Lamu, Anza, Mandera, and Tertiary Rift basins.

On October 4th, 2007, in Nairobi, Lundin Kenya B.V., a wholly owned subsidiary of Lundin Petroleum, signed a PSC (Production Sharing Contract) with the Honourable Minister of Energy of the Republic of Kenya. Block 10A covers an area of 14,748 square kilometers and is located in the onshore Anza Basin, an extension of the prolific Muglad Basin of Sudan.

From the NOCK website: "The Anza Basin is one in a series of Cretaceous-Tertiary failed rifts that trend across the Central African Craton from the Benue trough in Nigeria through Chad and the Central African Republic, the Sudan and Kenya. The right lateral movement on the Central Africa rift system is interpreted to have translated to Northeast-Southwest extension in Sudan and Kenya beginning by Barremian-Neocomian (Lower Cretaceous) time, resulting in basins with an overall northwest - southeast trend that is nearly perpendicular to the shear zone. Rifting continued into the Tertiary. Muglad, Melut and Blue Nile Basins of Sudan strike in the same direction as the Anza Basin. The Anza Basin is thought to correlate with the Mugland Rift Basin of South Sudan where profilic oil discoveries have been made The Anza Basin extends towards Lake Turkana and is separated from Mandera and Lamu Basins by the NW-SE trending Lagh Bogal fault and ENE-WSW trending Garissa-Walmerer basement high inferred fault respectively. The total surface area of the Anza Basin is about 94, 220 sq. km. The deepest well drilled in this basin to date reached a total depth of 4,392m."

In many cases, it is the small or mid-size independent oil and gas companies that do the major exploration, only to be gobbled up (thinking of Canadian Thanksgiving and turkeys!) by the Majors who are looking at bringing on proven reserves, without having to do all the hard exploration work. First Calgary Petroleum in Calgary is another small company that is working exclusively in Algeria. The logistics of working in Africa or any area where there is a lack of infrastructure (roads, pipelines, etc.) makes these challenging, yet exciting ventures to be involved in if one is fortunate enough.

Often in oil and gas, we only see the Majors (the ExxonMobils, Total, BP, Eni, etc.) and we tend to forget about the small companies that forge the way, through exploration and aquisition.

The good news is that exploration is continuing and there are opportunities out there for small and large companies to participate in this. Lundin and First Calgary are showing that Africa is not the great unknown and by willing to go into countries and take a chance, there may be successes. There may also be failures, but that comes with the business of exploration

Look out for these juniors!

Heritage Oil: Kurds & Turks, Lake Albert - Africa and the Middle East

A recent story showed up on the Globe & Mail about a dynamic company that is exploring in some parts of the world where many people would shy away from. This company, is Heritage Oil. Though small, they are working in Uganda, Oman, Russia, DR Congo and Iraq.

As you can see in the story mentioned in the Globe & Mail Heritage Oil is caught potentially in the crosshairs of the Kurds and the Turks. There has been talk of Iraq splitting into three distinct regions: a North, a Centre, and a South, based on religious lines and views. The northern portion (which is mainly occupied by Kurds) is a region that has significant oil and gas potential in all of Iraq.

A note from Wikipedia, shows that the Kurds are "According to the CIA Factbook, Kurds comprise 20% of the population in Turkey, 15-20% in Iraq, perhaps 8% in Syria,[41] 7% in Iran and 1.3% in Armenia. In all of these countries except Iran, Kurds form the second largest ethnic group. Roughly 55% of the world's Kurds live in Turkey, about 20% each in Iran and Iraq, and a bit over 5% in Syria.[42]. These estimates place the total number of Kurds at somewhere between 27 and 36 million."

With the above statistics you can see these are a people who are spread among 5 different countries, each country having their sets of laws and beliefs. Even when I worked in Algeria, many years back, there was talk about the Kurds and how essentially their country (Kurdistan) was broken up and divided (colonialism - British, French, etc.), much like Africa; divided up based on Geography, rather than Culturally (as in tribes) - hence maybe a reason for much of the turmoil we see in both these regions.

What brings a small company into the crossfire? The Turkish government recently announced that they have approved military strikes against Kurdish separatists operating from northern Iraq.

Earlier this month, Heritage announced it had reached agreement with the Kurdistan regional government that would eventually produce 20,000 barrels of oil per day. The company is also planning to build a refinery to process the crude, in a 50-50 joint venture with the Kurdish government.

As it also happens, the Kurds living in Turkey have been taking refuge in Northern Iraq, hence the proclamation from Ankara.

If this were not enough for Heritage Oil to handle, a recent release from AFP shows that even Lake Albert (which separates DR Congo and Uganda) has been more than peaceful ever since oil was found beneath the lake.

Quoting the AFP story:

"In a statement, Heritage said its vessel was "within Ugandan waters in Lake Albert in the process of lifting cables to mark the completion of a seismic survey" when a UN patrol boat detained the ship and its crew.

"This was a routine check, not hostile, and there was full co-operation. After a short interview at shore, the vessel and crew were released and returned to base in Uganda," Heritage said.

The clash between border forces was a "separate, unrelated, isolated incident," it added. "No employees or sub-contractors of Heritage were involved."

Tension between the two Great Lakes nations has shot up since August 1 when Uganda accused DRC troops of killing a British engineer exploring for oil on the Ugandan side of Lake Albert."

There is always easy oil (say in countries like Canada, Norway, the UK) and then there is difficult oil to find, extract, refine, and produce and export, like the type Heritage is after. As I've said in previous posts, it is small companies like this one that are leading the way and willing to take the risk.

Being an adventurer myself (having worked in Africa), this is the type of company I like working for - ambitious and willing to take on a challenge. Yet handle the challenge with tact, experience and an understanding of the environment they are working in.

In oil and gas exploration, you have no control over where the oil is found or the politics - but you have to have the drive to want to build a successful exploration program, based on risks and in many cases based on the unknown. The major unknown is people - who can predict what will happen on a political level? No one.

This will be an interesting story to watch and see how it plays out.