Bankers Petroleum

Banking on oil┬áAbby Badwi of Bankers Petroleum talks to Ruari McCallion about names, exploration and being a Canadian company with the biggest stake in EuropeÔÇÖs largest onshore oilfield. The rapid rise in oil prices during 2007ÔÇô08 brought a lot of marginal fields into play and raised hopes for the profitability of hard-to-extract oil resources. The subsequent fall put many plans back on the shelf, but there are some companies with investments in oilfields that can be operated profitably in a wide range of market conditions.ÔÇ£At $40 a barrel, which translates to $25 for heavy oil quality, royalties and operating costs exceed net gain, but at $60 to $70 a barrel, enhanced recovery methods make a lot of sense,ÔÇØ says Abby Badwi, CEO of Bankers Petroleum, which is headquartered in Calgary, Alberta. The method heÔÇÖs talking about is thermal extraction. It involves pumping steam into oil-bearing geological formations, which heats the oil and makes it more fluid, and thus easier to extract. The oilfield that Bankers has is in Albania, a small European country northwest of Greece, across the Adriatic Sea from Italy. Its isolation for 40 years after World War II, under the Communist regime of Enver Hoxha, made it a poor country, but this has turned out to be something of a bonus. It never looked to Soviet Russia for leadership, remaining a significantly rural economy, and that, in turn, meant that Albania, unique in Europe, did not adequately exploit the oil reserves that lay beneath its surface. Bankers Petroleum operates and has the full rights to develop the Patos Marinza and Ku├ºova heavy oilfields pursuant to a 25-year license agreement with the Albanian National Agency for Natural Resources (AKBN) and a Petroleum Agreement with Albpetrol Sh.A (Albpetrol), the state-owned oil and gas corporation. The Patos Marinza oilfield is the largest onshore oilfield in continental Europe. But why should a Canadian company get interested in this small part of an old continent? ÔÇ£What is special about Albania is that the areas weÔÇÖre exploiting are ÔÇÿheavy oilÔÇÖ fields,ÔÇØ says Badwi. ÔÇ£Without heavy oil technology, it would have limited recovery and productivity.ÔÇØ Canada is the worldÔÇÖs leader in heavy oil technology and has been for decades, if not centuriesÔÇöthe indigenous peoples developed techniques for boiling oil sands and extracting the valuable hydrocarbons way back. CanadaÔÇÖs knowledge infrastructure is becoming an increasingly valuable resource.ÔÇ£The company was created by people who have heavy oil expertise,ÔÇØ he says, explaining why a company focused on Albania is based in and funded from Canada. But the name is interesting, also. ÔÇ£Some of the original founders were bankers.ÔÇØ Simple and logical.Bankers Petroleum was established in 2004, the same year it acquired its exploration and exploitation rights. It now has revenues of around $110 million and employs about 180 people directly, of whom 100 or so work in the field. A further 100 workers are provided by services and drilling contractors, and that, too, is worthy of comment: since oil prices are below the economic threshold for thermal and water flood extraction, how is the company able to function effectively? Why arenÔÇÖt the wells mothballed until the rewards rise again?ÔÇ£The fields in Albania are currently producing in the region of 7,000 barrels a day,ÔÇØ Badwi explains. ÔÇ£We have around 300 million barrels of proven and possible reserves, but thatÔÇÖs based only on conventional primary recovery techniques. We expect to get a great deal more with water flood and thermal extraction techniques. We believe the fields have around five billion barrels in place; depending on the recovery factor it will mean a lot of oil still remains to be extracted.ÔÇØBankers invested last year around $75 million in its assets, into re-activating existing wells and new drilling. It recently undertook the first horizontal drilling ever in that part of Europe. ÔÇ£WeÔÇÖd rather get the easily extractable resources out first,ÔÇØ Badwi continues. ÔÇ£ItÔÇÖs the least expensive and most economical at the current time. Using conventional techniques will increase our productivity and cash flow, which will then enable us to deploy enhanced production methods. You canÔÇÖt simply go in with steam today and produce oil tomorrow; you need the infrastructure, and it takes time and is more expensive.ÔÇØ This is different from AlbertaÔÇÖs tar sands which are mined; AlbaniaÔÇÖs deposits are not tar sandsÔÇöthe oil is movable within the geological structures. The enhanced methods the company will be using are steam-assisted gravity drainage (SAGD) and cyclic steam, also known as ÔÇ£huff and puff.ÔÇØ An enhanced thermal recovery pilot is planned for 2010. ÔÇ£In cyclic steam, you inject steam for a certain number of days and then extract the oil in the normal way,ÔÇØ Badwi explains. With the current level of oil prices, the company could be forgiven for looking elsewhere, regardless of the value of its assets, but that isnÔÇÖt the case. ÔÇ£WeÔÇÖre very focused on all our activities remaining in Albania; we have no interest in looking elsewhere. As a junior oil and gas company, we have enough on our hands for our current financial and personnel resources. Companies our size donÔÇÖt often have access to large fields, and thatÔÇÖs what we have. We estimate the fieldÔÇÖs life to be in the region of 30 to 40 years, and we could get up to 50,000 barrels a day with enhanced methods.ÔÇØ The production profile at the moment is to get to 30,000 barrels a day by 2012/13. Bankers sources its equipment from wherever is appropriateÔÇöthe US, Canada, EuropeÔÇöand manages the field by expatriate rotating staff, as well as using local labor. Its banking relations with the International Finance Corporation (part of the World Bank) and the European Bank for Reconstruction and Development are significant and good.ÔÇ£AlbaniaÔÇÖs involvement with those institutions and its desire to become part of the European Union are very important,ÔÇØ says Badwi. ÔÇ£Albania is a poor country, but itÔÇÖs very industrious. It has a good democratic system, the economy is growing, and itÔÇÖs showing good environmental and social concern. Our joint efforts to clean up the field are important and should be noted also.ÔÇØAll in all, Bankers PetroleumÔÇÖs relationship with Albania sounds like good news for both parties, both now and in the longer term. ÔÇô Editorial research by Bob Meehan┬á