Questerre Energy

Jordan

Questerre’s principal oil shale asset is its acreage in Jordan. Questerre also holds the licensing rights to the EcoShale process, a proprietary process to produce oil from shale developed by Red Leaf. Questerre has an option to obtain licenses to utilize the Red Leaf process.

In April 2017, the Company acquired approximately 30% of the common share capital of Red Leaf. In a recent update to its shareholders, Red Leaf noted that it has reached an agreement with a subsidiary of the French supermajor, Total S.A., to exit their joint venture agreement. Red Leaf currently has over US$100 million in available cash and no debt. It intends to continue to pursue its business plan of commercializing the EcoShale process.

The Company concluded a Memorandum of Understanding (“MOU”) for the appraisal and development of oil shale acreage in the Hashemite Kingdom of Jordan (“Jordan”) in May 2015. The MOU covers an area of 388 square kilometers in the Isfir-Jafr area, approximately 200 km south of the capital, Amman. The initial term of the MOU is two years and it may be extended. In March 2017, the term of the MOU was extended by one year to May 2018. The Company estimates its financial commitments to range between $3-$5 million over the initial term.

 

In October 2016, Questerre commissioned an independent assessment of its oil shale resources (the “Jordan Resource Assessment”) in the Hashemite Kingdom of Jordan (“Jordan”). The Jordan Resource Assessment was conducted by Millcreek Mining Group (“Millcreek”), an independent qualified reserves evaluator, as defined by NI 51-101 with an effective date of September 30, 2016. The Jordan Resource Assessment was prepared in accordance with NI 51-101 and the standards contained in the COGE Handbook.

The Jordan Resource Assessment covers an area of over 380 square km and has been categorized, for the purposes of the Jordan Resource Assessment into three areas referred to Blocks A, B and C separated by two highway and infrastructure corridors. Questerre holds a 100% interest in the acreage and resources. The Jordan Resource Assessment did not include any of the Corporation’s other properties.  All anticipated results disclosed herein were prepared by Millcreek, which is an independent qualified reserves evaluator.  Millcreek used probalistic methods to generate high, best and low estimates of resource volumes.

Questerre is in the process of completing a conceptual study, however, at this time, given the preliminary nature of the Jordan Resource Assessment, it does not contain any estimates regarding the timing or cost to obtain commercial development nor has Questerre finalized the specific recovery technology to be used. Questerre is conducting an economic feasibility analysis, which involves assessing multiple retorting processes, including two processes that have been proven at commercial scale. Also under evaluation is the Eco-Shale process. In conjunction with the assessment of retorting processes, Questerre has commissioned and finalized three engineering studies for the mining, preparation of ore and upgrading of the produced oil and other products. Two additional studies for marketing the finished products and infrastructure including utilities are scheduled for completion in 2017. Questerre anticipates incorporating the results from these studies in a subsequent update of the Jordan Resource Assessment.

The oil shale deposits on Questerre’s acreage occur as kerogen-rich beds within the marine chalky limestones and marls of the Muwaqqar Chalk-Marl (“MCM”) Formation. The Jordan Resource Assessment is based on the Modified Fischer Assay (“MFA”) data from over 40 core holes, including 35 drilled by the Natural Resources Authority (“NRA”) and 5 drilled by Questerre in the last three years. The database utilized consists of over 1,900 MFA determinations ranging from 0.19 gallons per ton (“gpt”) to 49.49 gpt.

The analytical MFA data suggests that the MCM oil shale is a continuous package with an Upper Lean horizon (“ULH”) and a Lower Rich horizon (“LRH”). Determination between the ULH and LRH is based on assay, using 15 gpt as the minimum grade for the LRH. The ULH has an average thickness of 25.36m with a weighted average oil shale grade of 12.5 gpt. The LRH sits directly below the upper lean horizon with an average thickness of 40.68m. Weighted average grade for the LRH is 22.78 gpt.  Both oil shale horizons are continuous throughout the area though based on current drilling, the oil shale horizons appear to pinch out along the southern margins of Blocks A and C.

The petroleum volumes within the area that resulted from this estimation process were classified as Discovered Petroleum Initially in Place (“DPIIP”) and Undiscovered Petroleum Initially in Place (“UPIIP”), in accordance with the criteria of the COGE Handbook. DPIIP resources were further differentiated as Low, Best, and High based upon a statistical analysis of the thickness and grade data. It was determined that a radius of 1,000m from a core hole could satisfactorily be used for quantifying a Low resource estimate. Radii of 2,000m and 4,000m from a core hole were also determined for quantifying Best and High resource estimates, respectively. Resources classified as Undiscovered have not been assigned any levels of confidence. DPIIP and UPIIP are the most specific assignable categories of resources at this time given the preliminary nature of the Jordan Resource Assessment, the nature of recovery of the hydrocarbons by means of mining and that a program of work to determine commercial viability using established technology has not yet been completed.

Discovered and Undiscovered PIIP Estimate (MMbbls) as at October 1, 2016

 

 

 

The Best Estimate of the DPIIP is approximately 12.2 billion barrels of synthetic crude oil at an average grade of 20.12 gpt. Millcreek has been involved with conceptual mine planning to produce oil shale feedstock to support a surface retorting/processing facility capable of producing 20,000 bbl/d of synthetic crude oil. The purpose of the conceptual mine planning was to develop preliminary mining costs and identify a potential area(s) favorable to mine development. The mine planning considered all regions within the area where the LRH can be mined at less than a 2:1 volumetric ratio of overburden to ore, and considers maximizing ore grade, location to main road and other infrastructure, and minimizing the total mining cost per barrel. The tables below present the resource quantities and their classification that occur within the 2:1 volumetric ratio of overburden to ore, favorable to surface mining.  Best Estimate for the LRH identifies 7.8 billion barrels with an average grade of 22.66 gpt.

Discovered and Undiscovered PIIP Estimate (MMbbls) within a 2:1 Volumetric Strip Ratio as at October 1, 2016

 

 

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