Reserves and Resources Statement

Reserves

Reserves are categorised into Proved, Probable and Possible Reserves in accordance with the 2007 Petroleum Resources Management classification system (“PRMS”) of the Society of Petroleum Engineers (“SPE”).

Working interest Reserves estimates for Syria have, to date, represented the proportion attributable to the Group’s 50{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204} participating interest, of forecast future hydrocarbon production during the economic life of the Block 26 PSC, including the share of that production attributable to General Petroleum Corporation (“GPC”). Hydrocarbons discovered on the Block 26 PSC contract area in Syria have been evaluated as Reserves for several years leading up to, and after, the imposition of EU sanctions in Syria. The Group’s Reserves over this period have been based on estimates made by Gulfsands’ technical teams which then have been reviewed by independent petroleum engineers from external parties. External reviews of the Group’s Reserves have been performed by Senergy (GB) Limited (“Senergy”) since 2009. Since this time, commercial oil production from the Block 26 area has exceeded 21 mmbbls.

The Company recognises that it cannot give a definite timeline for the resumption of the full field development of the discovered fields within Block 26 that was suspended under the declaration of Force Majeure in 2011. Furthermore, the SPE PRMS Guidelines suggest that if the (re)commencement of development is five or more years from the date of evaluation then the volumes of hydrocarbons should be classified as Contingent Resources. The Company has concluded as of December 2015 that the uncertainty in any timeline over which EU sanctions in Syria may be lifted require that the volumes of oil, gas and condensate previously reported as Syrian Reserves be reclassified by the Company as Contingent Resources. This is discussed further in the Resources section that follows.

Whilst no definite timeline for the conflict can be substantiated, the Board believes that the EU sanctions ultimately will be lifted and will continue to monitor all activity focused on resolving the situation in Syria and reconsider the basis for reversing this reclassification in line with any future developments. 

Resources

The Group’s Resources are based on estimates made by Gulfsands’ technical teams. External reviews of the Group’s Resources have been performed where indicated for the Group by Senergy since 2009.

Summary of Contingent Resources

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by the application of development projects, but are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources are further categorised by the SPE into 1C, 2C and 3C according to the level of uncertainty associated with the estimates.

In accordance with the 2007 SPE PRMS, a guideline risk factor should be stated associated with the Contingent Resources quoted for each category; the risk factor indicates the likelihood that the Group will ultimately commercially develop the Resource. The risk factor considers all technical and non-technical factors that are impacting or are likely to impact on the likelihood of development, and is termed the “Chance of Development”.

The estimation and reclassification of Syrian Reserves attributed to the Block 26 Khurbet East and Yousefieh Production Concessions to Contingent Resources conducted in December 2015 has been prepared by the Company and reviewed by Senergy. In estimating the Resources it has been assumed that the period of time elapsed during which the Group has declared Force Majeure on its Block 26 development and production activities will ultimately be added as an equivalent time period extension to the contractually specified time period following which the Block 26 Production Concessions were due to expire.

As a consequence of the EU’s imposition of further sanctions in Syria which came into effect in early December 2011, GPC has assumed full operational control and responsibility for the management of Dijla Petroleum Company (“DPC”), the joint venture operating company set up for managing development and production operations within Block 26, and Gulfsands has withdrawn all of its staff previously seconded to DPC.

Since December 2011 Gulfsands has received from DPC updates on oil volumes produced from the Group’s Syrian fields under DPC’s operation. These updates have been received on an infrequent and irregular basis and it has not been possible for Gulfsands to verify the content of the information provided. The Group has updated its remaining recoverable Resource volumes for these fields on at least an annual basis based on the information that has been received from DPC. The Group’s Contingent Resource bookings (Gulfsands working interest 50{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204}) are stated for these fields in the following table as of 1 January 2016. The Resource figures are updated based on available production information up to 1 January 2016 but have not been reviewed by independent resource engineers.

In addition, Contingent Resources are estimated for the oil discovery at Al Khairat which is located a few kilometres outside of the Company’s existing Block 26 Production Concession areas, and these estimates have been reviewed by Senergy.

Unrisked working interest basis
As at 1 January 2016

Risk factor

Constituent

1C 2C 3C (Chance of Development)
Syria Block 26
(Working interest 50{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204})
Khurbet East & Yousefieh Oil + Condensate, mmbbl 39.4 69.7 112.1 90{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204}
Production Concessions Gas, bscf 14.7 33.4 68.7 90{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204}
Al Khairat discovery Oil, mmbbl 2.9 12.0 45.7 30{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204}
Total mmboe 44.7 87.3 169.3
Risked working interest basis
Total mmboe 38.5 71.4 124.9  

Note: Certain figures may not add up due to roundings
“Oil” includes condensate and NGLs
Gas is converted to mmboe at the conversion factor 1 bcf = 0.1667 mmboe

Summary of Prospective Resources

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations. They are further categorised by the 2007 SPE PRMS into Low, Best and High estimates. The quoted Low, Best and High estimates are the 90{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204} probability (“P90”), 50{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204} probability (“P50”) and 10{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204} probability (“P10”) values respectively derived from probabilistic estimates generated using a ”Monte Carlo” statistical approach.

In accordance with the 2007 SPE PRMS, a guideline risk assessment should be provided associated with the Prospective Resources quoted for Low, Best and High estimate categories. The risk assessment here is the Chance of Discovery; the additional risk assessment relating to the Chance of Development is not normally quantified at this level of Resource classification.

The Group has estimated Prospective Resources for its Moroccan Moulay Bouchta onshore permit, and these estimates have been reviewed by Senergy.

Unrisked working interest basis
As at 1 January 2016

Risk factor

Constituent Low Best High (Chance of discovery)
Morocco Moulay Bouchta permit
(Working interest 75{ee768eb9a3552264d3c26360535a309d545e25633656ebbbc446ab420944c204}) Oil and Sales Gas, mmboe
Jurassic leads 1 11 75 Medium-High
 Morocco Total  mmboe  1  11  75

Note: Certain figures may not add up due to roundings
“Oil” includes condensate and NGLs
Gas is converted to mmboe at the conversion factor 1 bcf = 0.1667 mmboe