EnerGulf Resources Inc.

Albania

BLOCK-8

ALBANIA

Energulf holds the rights to pending onshore hydrocarbon licence Block 8 in Albania.  Albania is a significant onshore oil producer in Europe and Block-8 is one of Albania’s largest exploration licences.

Background: On July 15, 2015, the Ministry of Energy and Industry of Albania (“Albania”) and Albanides Energy SHPK (“Albanides”), entered into a Production Sharing Contract (“PSC”) for Block 8, Republic of Albania, covering approximately 3,200 square kilometers.  Albanides is a wholly owned subsidiary of EnerGulf.  The PSC First Exploration Period term is three years, with a Minimum Work Program consisting of Geological and Geophysical work, a gravity survey, and Health Safety and Environmental studies, and a total minimum expenditure of $1,400,000 USD. The PSC Second Exploration Period is two years, with a Minimum Work Program consisting of Geological and Geophysical work, and 2D seismic acquisition (150 km), and a total minimum expenditure of $1,800,000 USD.  The PSC Third Exploration Period is two years, with a Minimum Work Program consisting of Geological and Geophysical and an Exploration Well to a depth of 2,000 meters, and a total minimum expenditure of $2,100,000 USD.  Each subsequent Exploration Period is dependent upon performance in the preceding Exploration Period.  In the event the Minimum Work Program costs less than the total minimum expenditure for the Exploration Period, the Albanides must pay Albania the difference of the actual expenditures and the total minimum expenditures.  Field discoveries are granted development and production periods of twenty years, with five year extension options.  The royalty tax is 10%.  Profit Petroleum (Oil – 0% – 3% or Gas – 0% – 7.5%) is shared on a sliding scale based upon cost recovery.  Realized Profit to the Contractor is taxed at 50%.  The PSC contains customary provisions for training and administration, local hiring, customs exemptions, export rights, environmental protection, bonus payments, notices, definitions and other matters.  The PSC is pending final government approval and publication.

Northern Albania consists of a complex nappe stack with a polyphase tectonic history. Two models exist to explain the origin of the different units.

Model A sees the Mirdita ophiolites as remnant of an autochthonous ocean (Pindos-Mirdita Ocean) flanked by two passive margins formed during Late Triassic to Middle Jurassic. The western margin corresponds according to this model to the External Albanides and the eastern margin corresponds to the Internal Albanides (Korabi-Pelagonia). This ocean should start to close since Middle Jurassic by remained open until the late Palaeogene/early Neogene. During that time, the ocean finally was closed and flysch basins were formed since the Palaeogene. Therefore, the nappe stack is west directed in the External Zones and east directed in the Internal zones, were the ophiolites were thrust over Korabi-Pelagonia in eastward directions.

Model B sees the ophiolites as far-travelled nappes coming from the east. Therefore, the ophiolites came from the Neotethys Ocean, which starts to form in the Middle Triassic and thrust over the Korabi-Pelagonian Zone in Middle to Late Jurassic times. All Triassic to Middle Jurassic sequences are seen as one passive continental margin facing the Neotethys Ocean to the east. During westward thrusting of the ophiolites (obduction) the Triassic-Jurassic sedimentary sequences form – in plate tectonic view – the lower plate and a west-vergent fold-and-thrust-belt was built with deep-water, partly restricted basins in front of the propagating thrust belt. Latest Jurassic to Cretaceous sediments were deposited as neoautochthonous cover on top of the Jurassic nappe stack. Ongoing tectonic movements (e.g. uplift and extension of the nappe pile with westdirected normal faults) in Cretaceous times and final closure of the Neotethys Ocean (= Vardar) in the east forms in Palaeogene to Neogene times the actual nappe stack. These youngest mountainbuilding processes led to west directed thrusting with formation of foreland basins in the External Albanides and east directed backthrusting in the Internal Albanides, again with formation of new foreland basins.

 

block-8-fig-01Fig. 1: Actual subdivision of tectonic zones in north Albania and the correlation with tectonic zones in adjacent countries. This tectonic subdivision based mainly on model A. By using model B especially the Krasta-Cukali zone, crucial for the whole area, must be subdivided.

According to our results model B is the convincing model. Therefore, northern Albania (Block 8) provides a high potential for oil and gas in deeper structures of the polyphase nappe pile, not only below the nappes consist of sedimentary rocks, also probably in parts below the ophiolite nappes.

In addition, also heat-flow affected with exception of parts of the Cukali nappe neither the External
Albanides nor the overthrusted nappes. Only the different source rocks of the nappe stack were buried during the Palaeogene/Neogene mountain building event. Due to this reason, we expect – as known from areas more to the south in Albania – good reservoirs filled with oil/gas below the actual nappe stack in Block 8.

Overview: formation of source and reservoir rocks in the framework of the geodynamic history

In the following, a brief outline with main events in the history of northern Albania is described and illustrated in simplified figures. The main events in the geological history are manifested on the whole western (Alps-Adria) margin facing the Neotethys Ocean forming a complex mountain building in Mesozoic-Cenozoic times.

After a phase of crustal extension in Late Permian to Anisian times mainly siliciclastic sediments and in parts also evaporites were deposited. Especially the evoporites play a crucial role. They form as highly ductile material shear zones, build domes and act as seals. In the Middle Anisian a first opening event led to the deposition of black, partly organic rich dolomites and limestones.

 

block-8-fig-02Fig. 2: Late Anisian situation of a rifted continental margin and formation of new basins. In these basins in parts organic-rich sediments were deposited.

Late Anisian break-up of the ocean led to the formation of half-grabens, partly with deposition of organic-rich sediments, but also breccias. In parts on uplifted highs shallow-water carbonates were formed (reservoir rocks) (Fig. 2).

In the Early to Late Ladinian practically the whole shelf was flooded due to volcanism and sealevel rises. Carbonate production practically stops and only hemipelagic sediments beside volcanics and cherty sediments were deposited. In Late Ladinian to Early Carnian times new carbonate platform established. Between the platforms remain restricted basins. Especially during sea-level drops organic-rich sediments were deposited (Fig. 3)

 

block-8-fig-03Fig. 3: Late Ladinian situation of newly formed carbonate platforms and restricted basins between. Source rocks were deposited between the platforms and near the base of the slopes.

After a gap on top of the Early Carnian platforms (in parts with deposition of bauxite) the platform drownend in Late Carnian and a huge carbonate platform was formed in the timespan Norian to Rhaetian. In the lagoonal areas (dolomites) organic-rich sediments were deposited. In many cases lagoonal dolomites represent both – source and reservoir rocks.

 

block-8-fig-04Fig. 4: Late Triassic situation with a huge platform covering large areas of the shelf. In the restricted lagoon dolomites were formed and act as source and reservoir rocks.

Around the Triassic/Jurassic-boundary carbonate production stopped as result of a mass extinction.
A contemporaneous sea-level drop exposed the platform. Later in the Early Jurassic the platform was flooded and in the proximal shelf areas a new carbonate ramp established (Adria platform).
Again, in restricted environments organic-rich carbonates were deposited. Mainly the Toarcian black shale event affected both areas, the deep-water shelf as well as the shallow-water areal. The shallow-water carbonates, mainly the shoals, are typical reservoir rocks.

 

block-8-fig-05Fig. 5: Early Jurassic situation. In the proximal shelf areas were Adria platform was formed. The Toarcian black shale event affected platform and deeper shelf areas. Organic-rich sediments were widespread deposited in the Tethyan realm.

In Middle Jurassic times the situation changed completely due to the onset of intra-oceanic subduction in the Neotethys Ocean. In late Middle Jurassic obduction of the ophiolites started and the former passive margin came in a lower plate position. In front of the obducted ophiolites a fold-and-thrust belt was formed. In front of the west-directed transported nappes deep-water trench-like basins were formed. These in parts restricted basins contain organic-rich sediments. On top of the advancing nappes new carbonate platforms establish. They act as reservoir rocks. Also the Adria platform was affected by tectonic shortening and in newly formed depressions restricted basins contain organic-rich sediments.

 

block-8-fig-06Fig. 6: Middle to Late Jurassic situation. Newly formed basins as reaction of mountain building processes and nappe thrusting receive organic-rich sediments, mainly by the high bioproductivity in the photic zone.

In the latest Jurassic, but mainly in the Early Cretaceous the remaining basins were filled by the erosional products of the uplifted mountain belt. The Adria platform remain stable during this time. Only reservoir rocks were deposited.

 

block-8-fig-07Fig. 7: Early Cretaceous situation. The remaining basins (foreland basins) were filled by erosional products of the uplifted mountain. No source rocks were deposited.

In the Late Cretaceous, after several tectonic events in the Early Cretaceous, the whole nappe pile and in parts eroded mountain was sealed by carbonate platform sediments. Only some deeper water areas remain in the outer shelf area. Only reservoir rocks were formed (mainly carbonates).

 

block-8-fig-08Fig. 8: Late Cretaceous situation. On top of the eroded mountain building practically everywhere shallow-water carbonates were formed. They act as reservoir rocks.

In Palaeogene/Neogene times the closure of the eastern part of the Neotethys Ocean (Vardar) led to collision and the formation of a new mountain building process. Several foreland basins were formed. They contain the erosional products of this newly formed orogen. Partly also backthrusting is characteristic for this time. The mainly siliciclastic sediments, deposited in the newly formed foreland basin are typical reservoir rocks.

 

 

block-8-fig-09Fig. 9: Palaeogene/Neogene situation. Due to the final closure of the Neotethys new basins were formed in the youngest mountain building process. Only reservoir rocks were deposited. But it cannot excluded, that in the newly formed foreland basins also some source rocks were deposited.

Burial of the source rocks, evaporites, seals, and traps

Since Neogene times uplift and erosion is responsible for the recent situation of a complex mountain belt. Most of the older (Triassic-Jurassic) source rocks are buried below the polyphase nappe

 

block-8-fig-09bFig. 9b: Actual situation. The complex geodynamic history result in a most probably perfect arrangement of seals and traps.

stack, especially by the youngest tectonic movements. Therefore we exclude a deep burial in older than Neogene times for the source rocks.

The role of the Permian evaporites between the different nappes in Block 8 is unclear and not explored. Evaporites are known in the northern continuation (Montenegro) and must be expected below the nappe stack of Block 8.

Actual cross-section through the tectonic zones of Albania – comparison of the tectonic position of Bock 8 with known Oil and Gas fields in Albania

In the following cross-sections through Albania are shown and discussed.

 

block-8-fig-10Fig. 10: Tectonic map of Albania with position of the cross-sections of Fig. 11 and Oil and Gas fields in southern Albania. For further explanation see text.

 

 

block-8-fig-11Fig. 11: Cross sections through Albania and especially through Block 8. For position of the crosssections see Fig. 10. The cross-section in black and white is the published cross-section (own results), compared with the coloured cross-sections, drawn only schematically. The tectonic position of northern Albania corresponds to the tectonic position of the Ionian zone in southern Albania, where the Oil and Gas fields occur.

A key point for this interpretation is to understand the role of the strike-slip fault running through the Mirdita and Cukali Zones. This strike-slip fault (older than Palaeogene-Neogene foreland basin formation) is responsible for the westward offset of the tectonic zones south of this strikeslip fault.

Fig. 10 shows the actual tectonic subdivision of Albania. The green box shows the known oil and gas fields in Albania. All field are interpreted as part of the Ionian Zone, but in fact the reservoirs are bound on the sedimentyry successions of the Palaogene-Neogene foreland-thrust belt. The source rocks are unknown, but can be expected in the Mesozoic sequence of the nappe stack below the Palaeogene-Neogene basins.

Typical source rocks are the Toarcian black shales and the Middle Jurassic cherty sediments (own investigations). Therefore, not only from the tectonic point of view this part of the Ionian zone with the Oil and Gas field corresponds perfectly with the Gashi and Albanian Alps Zone, as shown in Fig. 11, also the Triassic-Jurassic sedimentary sequence correspond to the known sequences from Northern Albania (Cretaceous is unknown).

Palaeogene-Neogene basins in the northward continuation of the basins in southern Albania (e.g., in Montenegro and Croatia) contain no oil and gas. In this area (Dinarides) the Palaeogene- Neogene mountain building processes crosscut a different older nappe stack. Most source rocks were deposited further east.

In conclusion the complex geodynamic history of the Albanides result in a most probably perfect situation of different seals and traps in the polyphase nappe stack of Block 8.

The tectonic different units in north Albania provide a high potential for reservoirs, but reservoirs could exits not only below the nappes consist of sedimentary rocks, also in parts probably below the ophiolite nappe stack some reservoirs can be expected.


BULQIZA-BATRA CHROMITE LICENCE

ALBANIA

EnerGulf controls chromite licences (previously controlled by Columbus Copper Corporation) covering the most prospective and productive chromite terrain in Albania. Throughout the communist era that lasted from the Second World War until 1989, Albania was one of the primary producers of chromite in the world. In the 1980’s, Albania was the third largest chromite producer in the world with over one million tonnes produced annually. Some 80% came from the Bulqiza and Batra mines* that underlie EnerGulf’s principal chromite licence. This chromite was, and still is, recognised as some of the finest quality in the world due to its high chrome to iron ratio that commonly exceeds 2.5:1 with best grades in excess of 3:1. This places Albania along with Kazakhstan and Turkey as countries that produce high grade (+38% Cr2O3) and high quality premium-priced direct shipping ore that goes into high quality stainless steel.

EnerGulf’s licences are at the heart of the most prolific producing area of the last 50 years and where more than 20 million tonnes have been produced making the orebody** hosting the Bulqiza and Batra mines* the largest ophiolite-hosted chromite deposit in the world. EnerGulf’s licences consist of the 1.013 km2 Qafe Burreli Licence and the 5.77 km2 Bulqiza-Batra Licence for a total of 6.90 km2 in two distinct project areas containing numerous chromite showings, prospects and past-producing mines. The Bulqiza-Batra Licence includes the east and west mineralized extensions of the fold structure controlling and hosting the chromite ores in the Bulqiza and Batra mines* and also includes much of the past producing Thekna Mine which is reported to host an historical resource of 330,000 tonnes grading +40% Cr2O3 and where Columbus Copper’s drilling in 2011 has demonstrated scope for significant expansion.

Chromite is essential in the production of stainless steel. Demand is fed by China and, to some extent, India. China produces some 40% of the world’s stainless steel and production has risen by an average 22% over the last decade. China’s stainless steel producers all have plans to increase production over the next decade and demand for Albanian chromite is expected to rise accordingly. Currently, Chinese companies buy about 90% of the chromite exported from Albania.

Demand over recent years for 40% Cr2O3 lumpy ores has meant prices ranging from $160 to more than $600 per tonne, but generally at or above $200 per tonne CIF. Despite the geological complexity of Albanian deposits, combined mining and transportation costs are usually significantly below $100 per tonne. A deposit as small as 5 million tonnes could be capable of sustaining a 1,000 tonne a day mine for over 15 years. Lower grade disseminated and banded material can be processed into more than 50% Cr2O3 with chrome to iron ratio exceeding 2.6:1, which can fetch higher prices from stainless steel makers.

In 2011, as Columbus Copper was preparing to develop a series of adit openings to explore for and produce high-grade lump chromite, it was made aware of some irregularities with the renewal of its licences, resulting in all work being suspended and the projects being placed on care and maintenance. As a consequence, Columbus Copper launched a lawsuit against the Albanian Ministry of Economy, Trade, and Energy (“METE”). In July 2012, Columbus Copper announced that it won at trial and on a subsequent appeal by METE. In November 2012, Columbus Copper announced that METE had not appealed the decision to the Supreme Court of Albania during the allotted appeal period. Columbus Copper has therefore recovered its full legal rights to its chromite licences. The licences permit all exploration work including; drilling and underground development for a twelve month period during which time EnerGulf may apply for full mining rights.

EnerGulf is now considering the best path to advance the projects.

* Some portions of the historical Bulqiza and Batra mines are not included as part of EnerGulf’s Bulqiza-Batra Licence.

** The term “orebody” is used in the historical sense and is not meant to imply current economic viability.

 
 
 
- EnerGulf Resources Inc.