Gulfsands is the operator of the Block 26 Production Sharing Contract (PSC) with a 50% working interest; the other 50% interest is held by Sinochem. Block 26 covers an area of 5,414 km². The PSC grants rights to explore, develop and produce from all depths outside the existing field areas and from the deeper stratigraphic levels only within the pre-existing discovered field areas. The final exploration period of the PSC expires in August 2012.
There are two producing oil fields of Cretaceous age within the PSC area, Khurbet East and Yousefieh. In addition, two further oil and gas discoveries of Triassic age lie beneath the Cretaceous oil producing reservoir in the Khurbet East field, within the Butmah and Kurrachine Dolomite formations, for which development approval has been granted.
The development and operation of these fields is being undertaken by Dijla Petroleum Corporation (DPC), a joint operating company formed between Gulfsands, Sinochem and the General Petroleum Corporation (GPC) for this purpose, to which staff of both Gulfsands and GPC have been seconded. Since the imposition of sanctions against GPC on 1 December 2011, which led to the subsequent declaration of force majeure under the PSC, Gulfsands has had no involvement with the operations of DPC and Gulfsands staff seconded to DPC have been withdrawn, leaving DPC to be run by its GPC secondees.
The Khurbet East field was discovered in June 2007, and commercial development approval was granted in February 2008 for the Cretaceous Massive Formation and Triassic Kurrachine Dolomite formations. Oil production from the Cretaceous Massive Formation commenced in July 2008. The Yousefieh field was discovered in November 2008, commercial development approval was granted in January 2010, and oil production commenced in April 2010, also from the Cretaceous Massive Formation.
The original discovery well at Yousefieh is located approximately 3 km away from the Early Production Facility (EPF) at Khurbet East. The development and production period for the Khurbet East Cretaceous Massive and Triassic Kurrachine Dolomite formations expires in February 2033, and that for the Yousefieh field in January 2035, but each may be extended for a further 10 years at the Contractor's option.
The crude oil currently being produced from Khurbet East has an API gravity of approximately 25°, slightly lighter than that of the area benchmark Syrian Heavy crude oil. Oil produced from Yousefieh is similar to that from Khurbet East, with an API gravity of 24°. The oil is transported via pipeline to the SPC-operated gathering facilities located some 30 km away at Tel Addas. There it is blended with the Syrian Heavy crude oil, and transported to the Mediterranean port of Tartous using SPC's oil handling infrastructure.
Approval for the development of the Khurbet East Triassic Butmah oil and gasfield was granted in December 2011. Oil from the Triassic Formations inKhurbet East has been sampled and has been found to be lighter than thatproduced from the Cretaceous Formation, with an API gravity of 35°, andit contains a higher gas content. In addition, small amounts of condensatehave been recovered from the gas cap in the Butmah Formation. Theconstruction of sour gas sweetening and export facilities at Khurbet East isplanned to enable commercial production of hydrocarbons both from the Butmahand also from the Triassic Kurrachine Dolomite Formations. The developmentand production period for the Khurbet East Triassic Butmah Formation expiresin December 2036, but may be extended for a further 10 years at the Contractor's option.
Gross oil production from Block 26 increased from an average 20,600 bopd inJanuary 2011 to just over 24,000 bopd in August. However following theimposition on 2 September 2011 of EU sanctions against the import ortransportation of Syrian crude oil or petroleum products, which severelycurtailed Syria's ability to export its oil, GPC instructed Gulfsands toreduce its production. As a result gross production fell to an average ofapproximately 14,500 bopd in September, 6,000 bopd in October, and 4,800bopd in November. Production was completely shut-in during March 2012,compared with 14 wells in production in August. For the full year, grossproduction averaged 16,628 bopd compared with 18,330 bopd in 2010. Of the2011 total, 14,775 bopd came from Khurbet East and 1,853 bopd from Yousefiehfield. Production since 1 December 2011, being the date of imposition ofsanctions against GPC, has been estimated in order to produce these fullyear figures.
The Khurbet East Cretaceous Massive oil reservoir has continued to performimpressively: based on results to the end of August (the last full monthbefore production cuts were imposed) the reservoir pressure had declined byless than 1% since the start of production in July 2008, and the field watercut was well below 1% by volume. As at the end of November, cumulativeproduction from Khurbet East since inception stood at 17.6 million barrels.
With the shut-in of the Yousefieh field in September the opportunity wastaken to conduct a long-term pressure build-up survey. This found that thebottom-hole pressures for the production wells recovered rapidly during theshut-in period to an average pressure less than 1% below the initialpressure of the field measured prior to first oil in April 2010, signifyingthe likely presence of a large regional aquifer within the Massive just asfor Khurbet East.
During the year four Massive development wells were drilled: two each onKhurbet East and Yousefieh. Three of the wells were designed as delineationwells and the fourth was designed as a production well.
On Khurbet East, KHE-19 (completed in July) was aimed at delineating thenorth-west flank of the field. The original vertical well encountered theMassive reservoir section outside the limits of the field and so the wellwas side-tracked horizontally back in a south-easterly direction. A grosshorizontal reservoir section of 67 m was drilled and the well flowed 5,516bopd with a 48/64" choke on test, the highest flow rate achieved from anywell on Block 26 to date. KHE-20 (completed in September) was anothervertical delineation well, on the north flank to the east of KHE-19. Itencountered a net oil column of 30 metres, with average oil saturation of 82%, and flowed 1,897 bopd with a 48/64" choke on test. On Yousefieh, YOU-7(completed in June) was drilled to delineate the northern flank of thefield. It encountered a net oil column of approximately 27 m and flowed ontest at a rate of 528 bopd with a 2" choke under nitrogen lift. It is likelythat the well will require artificial lift facilities, and possibly acidstimulation, to produce at a satisfactory rate on a continuous basis. YOU-8H(completed in November 2011) was a development well drilled horizontally totarget recoverable volumes on the south flank of the field: the wellintersected good quality reservoir and penetrated 256 m of net oil pay.
Work on the central production facility at Khurbet East, contracted toSaipem, was suspended in December after Saipem declared force majeure undertheir contract as a result of EU sanctions. The project was still at designstage, having been delayed already owing to the deteriorating situation inSyria. A new oil processing substation was constructed at Khurbet East,which increased the production capacity for Block 26 as a whole by 3,000 bopd to 24,000 bopd with effect from the beginning of August.
Six exploration and appraisal wells were drilled in 2011, three of whichwere oil discoveries: the Triassic Butmah discovery within the Khurbet Eastfield, Yousefieh East and Al Khairat. In addition a successful appraisalwell was drilled to appraise the Triassic Butmah discovery.
The Butmah discovery was made in May by the KHE-101 well, which targeted theTriassic Butmah and Kurrachine Dolomite Formations beneath the Khurbet Eastfield, and encountered a gross vertical oil column of 69 m with a net togross ratio of approximately 35% and average porosity of 21%. An open holedrill stem test (DST) on this section achieved a stabilised flow rate of447 bopd of 34° API oil plus associated gas. In the deeper KurrachineDolomite reservoir, however, although a 6 m net oil column was assessed, anopen hole DST recovered only minor amounts of oil, gas and formation water,which was believed to be due to the presence of relatively few naturalfractures in this area of the reservoir. An application for commercialdevelopment of the Triassic Butmah was subsequently submitted to the Syrianauthorities and approval was granted in December.
The KHE-102 Butmah appraisal well was spudded in October on the northernflank of the field. An open hole DST conducted in January 2012 over a 48 minterval in the Butmah section flowed wet gas at a rate of 10.7 mmcfd with a32/64 choke, with associated 524 bopd of 58° API condensate and with noformation water. The results were interpreted as signifying an oil reservoirwith an overlying gas cap which also contains small volumes of condensate.Again however, the Kurrachine Dolomite section failed to flow oil in an openhole DST.
The Abu Ghazal exploration well, targeting multiple Cretaceous and Triassicobjectives, which completed drilling and testing in May, encounteredhydrocarbon columns in the Triassic aged Butmah and Kurrachine Formationsbut only recovered small sub-commercial quantities of viscous heavy oil.
The Safa exploration well, targeting a Cretaceous age prospect on trend withthe Khurbet East field, which completed drilling and testing in August,encountered non-commercial heavy oil and was plugged and abandoned.
On the other hand the Yousefieh East exploration well, which also completeddrilling and testing in August, encountered a commercial oil column of 12.8m net, and produced some 250 bopd of 20° API oil on test with no associatedwater. It is interpreted to represent an eastern flank extension of theYousefieh field (falling within the Yousefieh Development License Area(DLA) and is likely to require acid stimulation and the installation ofartificial lift facilities, in due course, in order to be placed onproduction.
The Wardieh exploration well, which completed drilling and testing inSeptember, targeted a combined structural and stratigraphic trap informations of Cretaceous age. While drilling it encountered a zone of liveasphaltic hydrocarbons overlying a porous reservoir zone, the combination ofwhich caused the well to be plugged and abandoned for safety reasons within271 m of its planned total depth. A comprehensive geological and operationalreview of the well is being undertaken.
Finally, the Al Khairat exploration well, located 3.5 km south-east ofYousefieh East, which completed drilling and testing in December, found a 29m net oil column in the Cretaceous Massive Formation. When tested open holeover a 26 m interval with a 2” choke and under nitrogen lift it flowed 1,826bopd of 22° API oil. Al Khairat is located outside the Yousefieh field DLA,but no application for commercial development approval has been made becauseof EU sanctions.
The 3D seismic data acquired in 2010 over a 1,060 km2 area was processed inH1 2011 and has now been interpreted. A reprocessing project was undertakento merge the 2009 and 2010 vintages of 3D into one consistent volume andthis was completed in Q4 2011. The acquisition of a further 250 km2 of 3Ddata commenced in Q3 2011 around the Maghlouja prospect, however owing tothe situation in-country the seismic contractor declared force majeure onthe contract.
Plans for 2012
Following the declaration of force majeure on its PSC in December the Groupno longer has any involvement in the operation of producing fields, or thedevelopment of discoveries, on Block 26, and no longer seconds staff, orsupplies technical assistance, to DPC.
Gulfsands announced in early February 2012 that it had decided to cease allfurther exploration in Syria in light of the effect of the EU sanctions andthe effect these were having on the procurement of essential goods andservices for exploration operations. It is the intention that local staffwill be engaged, for the time being at least, in conducting internal studiesand analysing potential exploration prospects with a view to being in aposition to resume exploration activity as and when sanctions are lifted, onthe assumption that an extension in the exploration period (which iscurrently due to expire in August 2012) can be negotiated with the Syrianauthorities to replace that lost due to the sanctions.