Primary Resources Fractions

In Mississippi, a few kilometers from the city of Natchez, KFG Resources (TSX.V: KFG) is about to try something that CEO Bob Kadane believes will create significant value for shareholders of his company.

Buried beneath the field is the Fayette Fayette salt dome - the dome of salt on the oil last of its kind in the region that has not been redeveloped. In February 2008, KFG will carry out the first 3D seismic survey on the Fayette salt dome in which it holds 100% working interest. The seismic data will be analyzed with existing data from more than 100 newspapers and determine the best fifteen or more targets for a drilling program to begin this summer. The objective will be to drill through multiple oil and gas formations in the shallow Wilcox formation (from 3500-3900) and the Lower Tuscaloosa (9,600 feet).

salt domes as Fayette were deposited some millions of years ago when the shores of the Gulf of Mexico were located deep within their current position. As the water evaporated, they left pockets of thick salt layers. Over the millennia, these were buried by sand, soil and sediment. Over time, thick layers of salt bowed in the center and penetrated upward through the existing layers of rock - hence the "dome" shaped structures. The salt is hard and impenetrable, the upward bending of the salt formed traps or pockets where oil and gas collected, often in large quantities.

There are many characteristics of salt located in the vicinity of Natchez. While most were thoroughly explored and exploited from the 1930s until today, the Fayette Salt Dome has seen limited exploration.

Of the 4,000 acres that make up the field and the Fayette salt dome, only a fraction has been explored. Historically, exploration companies have drilled 29 deep holes on the east side of the dome. The west side, however, has seen eight deep boreholes - making the west side a priority.

The problem with mapping on the west side of the dome, Kadane says, "was that the holes are too far apart to draw logical conclusions from surface mapping (well logs). Some of them had small quantities of oil and gas, so they could be on the verge of a larger untapped. These old wells are 1000-2000 feet away and you could have a tank easily run right them and without even knowing it. And that is what the seismic tell. "

3-D seismic surveys, or "seismic" as they are commonly called, use sound waves to locate rock formations in the earth that are associated with oil and gas. Acoustic vibrations are created either by a controlled explosion, or more often by the use of a heavy vibration, that hitting the ground creating waves that radiate into the earth. The sound waves are reflected off subterranean rock, sediment, salt and other layers. The length of time it takes for the waves travel through layers of different densities is used to create a profile of the structure. With the use of computers, the 3-D seismic is incredibly detailed and complex. Billions of data points are compiled to create a three-dimensional picture of underground structures thus dramatically reducing the element of chance in drilling wells.

Then there are the well logs of more than fifty wells already drilled in the area of Lafayette. These journals are also like the electric cardiogram images depicting a foot off the image of the types of hydrocarbons present in a well hole. With the log data, the presence of hydrocarbons is measured up and down the borehole and liabilities of about 20 feet in all directions.

In addition, Kadane says, 3D seismic signatures indicate areas of shallow gas undepleted and the new oil undepleted.