This week we discovered that the original $50US, per metre being used in our repository model was wrong. The new values are from $1.00US to $6.00US thus making the underground storage repository model unviable at this stage without an extensive feasibility is under taken. A lot has been learnt due to Pohlman's research and we will be receiving results from his study in the near future. note: I understand from John that he has 8 other projects to complete before the end of this month so we will all have to be patient.
In January Singfield proposed to Risinger that we consider bringing the technology to Houston with expectations of finding capital in the order of $10mil US and greater. To this end CS tabled a rough program that would involve demonstrating all aspects of the mass acquire and cuttings units over a 4 week period involving up to 6 persons, 1 tonne of equipment, and visiting target markets around the world. The budget involved 6 weeks of preparation. The total amount came to $750,000Aus.
After having discussions with key personal in the USA, JR concluded that a better focus would be to change the emphasis from mechanical to functional. In other words build a data base that would have a reservoir of data in it so we could demonstrate to the market the end user benefits.
Pohlman, Nelson, and Singfield all agreed that this would deliver a greater impact than just a mechanical style presentation. To this end CS contacted Santos in Brisbane and had a meeting with 3 of the senior Santos exploration people at IRAS base. They have offered us access to a complex reservoir, with hot sands and thin structure. They have drilled 15 wells of which 6 are cored. Initial indications are that to image the complete reservoir would involve 9-10 thousand cutting samples and about 200 metres of core.
Singfield reported back to Risinger, Pohlman, and Nelson. Risinger asked for a revised budget which Singfield started working on. Singfield then inquired with Nelson if we could get better exposure and thus improve our chances to raise the main capital if we were to image a US base reservoir. Nelson responded in the affirmative, at which point CS ask RN to contact Bob Sneider and ask of him if he could find us a reservoir that has 10,000 cutting samples and about 200 metres of core for our group to pilot with?
Sneider advised Nelson that since their last chat regarding IRAS he had briefed Mr. Scot Pinker, Director of the Bureau of Economic Geology, about the opportunity this technology could represent to them in their current project. Sneider further encouraged us to contact both Pinker, and Mr. Doug Radcliff, who is responsible for the Core storage facility based in Austin. Nelson recommended that Singfield briefs Pinker and Pohlman surveys Radcliff. I believe from Nelson that Sneider was very encouraged for us.
Singfield tried to contact Pinker only to find he was in Mexico and would only be returning on February 12th. In the mean time Singfield contacted Mr. Gunter Wellman, Director of the Calgary Government Core Store which has the following assets and operating costs:
Mr. Gunter stated that over the last 5 years there has been a growing interest in the Geology of rock samples and that cutting are now being considered in a different way, with a committee studying the potential value that can come from cuttings including auto sampling at the rig. This puts them way ahead of anybody I have talked to in the last year.
Some imaging is being done with a digital camera but GW does not believe that all of the core could be commercially imaged in less than 30 years.
We have learnt that between BEG and the Alberta government repositories there is 2.7 million metres of core in storage.
Pohlman contact Dr. Marcus Milling head of AGI in the US. Milling agreed to send to Pohlman the latest survey work regarding core and cuttings. MM chairs a subcommittee called Save the Rocks and is one of the most knowledgeable individuals regarding core and cutting repositories in the States.
Milling logged onto the IRASNET web site and because of his use of Netscape was unable to view the main features our technology has to offer. Singfield made phone contact with Milling and explained the current issues regarding the technology and web site. Milling agreed to revisit the site with his college Mr. Christopher Keane.
Pohlman did mention that information passed onto him from MM indicates that the oil industry out of Houston have gotten together and are storing there core in a common facility in Texas with total stored meterage unknown at this stage but a cost per metre per year is $1.00US.
Pohlman is waiting for the arrival of the report from MM, along with interviewing other contacts before he will start on his report.
Besides having nearly daily contact with JP, and RN I have been working on both the promotion and development of the project.
Repository Model Work
A call to Calgary Core Store as a reported above resulted from a
conversation with Nelson about Sneider. Sneider had stated that the 2 largest core stores
was in BEG and Calgary.
The day after Pohlman talked to Milling, I contacted CK having expected a problem with CK's logon only to find CK had no problems just that he didn't have the time. (26 seconds on site) CK indicated that people over in England were doing very advanced spectral imaging of core and suggested I contact the. I managed to contact Mr. Graham Tulloch who is the collections Administrator for the British Geological Survey operation out of Edinburgh. He was unaware of any advanced program as such and was using a digital camera to image core and was not very happy with the end result. I invited him to the web site which he visited several hours after first contact. Not sure what this contact can mean I haven't pursued it any further.
Resulting from the call to Tulloch, I called the manager of the Department of Trade and Industry Core Library for Petroleum Core. I didn't get through to the manager but did talk to the assistant manager whom indicated that they have 290,000 meters of 1/3 slabbed core, 27,000 boxes of cuttings with about 5million samples, from 4,500 wells. This person was not interested in images because if industry wanted images then they could come to their facility and take them themselves.
All information has been pasted onto JP.
Pilot Program Planning
As mentioned earlier I am reworking the January estimates and am
preparing a new approach that will result in a reservoir of core and
cuttings data along with other types of factual data such as routine Core
Analysis, Special Core Analysis results and any other associated expert
reports such as petrology, geology, sedimentology, and palaeontology. It
would be our intent to include any Thin Section and Electron Microscope
images as well.
This stage will involve renting a office warehouse faculty for a 6 month period. We will need to install a high bandwidth internet connection, security, power, insurance, telephone, and hire furniture. This office will be used by the project programmers, engineers and workers. Several options to the above have being found and will be included in the final budget.
1 X full time programmer, 2 X part time programmers, 1 X part time Electronic Engineer, 1 X part time electrical engineer, 1 X part time draftsmen, 2 X part time core/cuttings technicians for capture, 1 x part time patent attorney, part time senior petroleum geologist, and a part time Petrophysicist.
Access to several machine shops and suppliers.
To date I have managed to establish we will need to store between 750GB to 1000GB of image data. (1 Terabyte). This will require 2 X PIII file servers, 1 X P4 to process the data, 1 X Dual PIII Server as Data Base server, 1 X PIII Proxy Server, 1 X PIII Web Server, 2 X SGI 230 with 17" ColourLock Flat Panel Screens, plus a Varity of network switching equipment from Base 100 to Gigabit.
I made contact with Mr. Chris Mendes, a Manager for Boland Software. Borland is the company that makes Delphi which is the programming language used by Andrew Niven. The complete IRAS project has been programmed in this language. They will be able to provide support to us in the areas of design, direct programming, and evaluation of not only Andrew Niven's ability as a Delphi programmer but a recommendation as to how much we should be paying Andrew as a contract Programmer. The other job they will be able to conduct for us is an independent report on how much work has gone into the source code to date thus helping place a value on it. This fits in with the discussions below with Risinger.
Chris Mendes will be submitting a quote for their companies services.
I have approached a media company that specialises in building corporate images which involves corporate naming, product naming & branding image creation within the targeted market, multimedia presentations, logos ect. I will require further direction from the group before proceeding.
As stated above this program will deliver multi-spectral imaging for up to 9-10,000 cuttings samples and 200 metres of core. It will take 4 to 6 weeks to build and prepare the equipment above for transport to the site containing the samples to be imaged and between 6 to 8 weeks to image the volume discussed. This period can be reduced to half the time if we run shifts during the acquire period. Not mentioned above is that during the acquire period we will need to employ between 3-4 extra labourers.
Pohlman has pointed out that we need to be in Houston no later than May. School in Houston breaks in the first week of June and from his experience forget trying to get all of the people you want in the same room from school leaving up to when school returns which would be in September! This needs to be very carefully considered!!!
To present in Saudi doesn't seem to have the same constraints.
Upon Risinger's return to Australia CS briefed JR on the developments over the last 10 days. Risinger agreed with the group that a Sneider backed pilot project would be better than a Santos reservoir. Risinger then instructed Singfield to produce a revised budget that would handle the full cost involved with development of a reservoir model that can be demonstrated over the web to the Houston communities. This will be ready by the last week of February. Singfield also indicated to JR that RN had stated BS's group had a budget and that we could possibly approach them for some help to fund the pilot project. To this end JR wants to find out what BS will commit to and what he won't commit to!!! Risinger indicated that Sneider expects use to return with an operational cuttings unit sitting on a drilling rig while he watches the samples arrive on his computer. Singfield then indicated another option which is CS goes to Houston and makes a presentation personally to Sneider then ask him for his support and help. Pohlman, and Nelson both feel that such an approach could work on Sneider without having to develop the full pilot. Nelson then suggested another option which is for use to invite BS and PS to Australia.
Singfield also briefed Risinger on the standing down of the development team for another 4 weeks. The only issue was with Andrew Niven. Risinger colcluded that Singfield should contact Niven and offer him a 6 month employment contract, advising him the new group will arrange some form of equity for software deal once an assessment of his work has been completed.
CORE:
There seems to be an undefined opportunity. This
market can be defined in 3 groups. Group 1 is the newly produced core of
which we have an unconfirmed amount of 91,000 metres/year. Group 2 is new
and recently drilled core the forms part of the same reservoir, and the 3rd
group is deep stored core that no body has looked at for years. On its own
core only tells part of the geological picture. With cuttings it tells all
of the picture.
Groups 1 & 2 can only be approached with an operational system
Group 3 seems to describe Bob Snieder's group. Mr. Snieder told Nelson that it could cost his new group over $US100milt to use our technology on their current project. The Saudis also fit this group profile as well as group 1 & 2. Both targets could be approached via a demonstration.
Originally valued at $US130mil per annum. The industry is already looking for this type of solution. Has the shortest development period. Even though the market hasn't been tested.
Involves the marketing of the image serving software. Mr. Kevin O'Hara, Director of Centrex Technologies, privately funded based out of Sydney has visited the IRAS web site in the last 2 weeks. This company is building Health Portals for use in private hospitals. He is interested in talking to us about using our image engine in his Portal. I expect to here from his senior program manager later this week.
Nothing has been down in this area to date other than theoretical.
Nothing has been down in this area to date other than theoretical.
Under lying all of the above is the software that is making it happen. Whatever we decide to do we must not under estimate the value of this software and the fact that we can possibly generate a greater revenue from the sales of the software than we can from selling the services.
Until next week!
PS: I expect it to be much shorter!!!
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