Gulfsands Petroleum plc (“Gulfsands”, the “Group” or the “Company” – AIM : GPX), the oil and gas production, exploration and development company with activities in Syria, Iraq, Tunisia, Italy and the USA, provides this update on operations in Syria.
Drilling and testing operations have recently been completed on the Abu Ghazal-1 (“AGZ-1”) exploration well. Potentially significant hydrocarbon columns were encountered within the Triassic aged Butmah and Kurrachine formations. However, a series of drill-stem tests (“DST”) undertaken on the well resulted in the recovery of sub-commercial quantities of heavy/viscous oil. The well has now been suspended pending detailed analyses of well results.
The AGZ-1 well commenced drilling operations on 23 January 2011, utilising the Crosco E-401 drilling rig and was drilled to a depth of 3850 metres Measured Depth (“m MD”). The well was planned to evaluate potential reservoirs within the Cretaceous aged Massive and Triassic aged Butmah and Kurrachine Dolomite formations within a large, fault bound structure identified and mapped on 3D seismic data.
The well encountered the Massive Formation at a depth of approximately 2572m MD, but in spite of elevated gas readings observed whilst drilling, the section drilled at this location was found to contain relatively poor reservoir properties and drill cuttings indicated only traces of oxidized oil and asphalt.
The Triassic Butmah Formation was encountered at 3287m MD with elevated gas readings and traces of oil in the mud system. Interpretation of wireline logs indicated a significant oil column; however no formation fluids were recovered when testing. The lack of any fluid flow from the formation is currently interpreted to be due to low permeability within the reservoir.
The well encountered the top of the Triassic Kurrachine formations at 3456m MD. Substantially elevated gas readings were encountered whilst drilling through this section and live oil was recovered in coring operations. Interpretation of wireline logs indicated a significant oil column, with subsequent testing resulting in sub-commercial volumes of very heavy to heavy oil (approximately 12 degree API) being recovered along with highly saline formation water.
The Crosco E-401 rig will now be moved to the Khurbet East No 19 (“KHE-19”) well location on the northwest flank of the Khurbet East field. This well is planned as a further step-out from the successful KHE-18 delineation in the northwest, which encountered high quality karst reservoir in the Massive formation. The KHE-19 well will evaluate an area estimated to contain oil-in-place of approximately 30 MMstb and if the well is successful there will exist an opportunity for possible (3P) Khurbet East reserves to be matured to probable and proven reserves categories at year end 2011.
Gulfsands drilling operations in Syria Block 26, using the Crosco E-401 and E-501 drilling rigs, are continuing as planned and have continued without interruption during recent months.
Ric Malcolm, Gulfsands CEO, said
“Whilst we are pleased to have encountered significant oil columns within the Abu Ghazal well, the production test results have been disappointing. We will now analyse all of the data prior to determining the extent of any further operations at this location. The rig will now move on to drilling the KHE-19 well as we continue with our very busy 2011 program of drilling exploration prospects and development wells.”
This release has been approved by Richard Malcolm, Chief Executive of Gulfsands Petroleum Plc who has a Bachelor of Science degree in Geology with 30 years of experience in petroleum exploration and management. Mr. Malcolm has consented to the inclusion of the technical information in this release in the form and context in which it appears.
Gulfsands is listed on the AIM market of the London Stock Exchange.
Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria. The Khurbet East oil field was discovered in June 2007 and commenced commercial production within 13 months of the discovery. This field is producing at an average gross production rate of approximately 18,000 barrels of oil per day through an early production facility. A second field discovery, the Yousefieh field, was brought on-stream in April 2010, and is currently producing approximately 2,700 barrels of oil per day. Block 26 covers approximately 5,414 km2 and encompasses existing fields which currently produce over 100,000 barrels of oil per day, and are operated mainly by the Syrian Petroleum Company. The current exploration license expires in August 2012. Gulfsands’ working interest 2P reserves in Syria at 31 December 2010 were 53.6 mmbbls.
Gulfsands is acquiring working interest positions in two exploration permits in Tunisia (Chorbane and Kerkouane Permits) and one exploration permit in Southern Italy (G.R15.PU) from ADX Energy Ltd the operator of all three permits. The Company’s interest in these permits remains subject to the completion of the Company’s farm obligations and various approvals from the governments of Tunisia and Italy.
Kerkouane Permit — Offshore Tunisia
G.R15.PU Permit (Pantelleria Permit) — Offshore Italy
G.R15.PU, is located offshore the island of Pantelleria southwest of Sicily in Italian waters and the Kerkouane Permit is located offshore northeast Tunisia. The two permits are contiguous and comprise a total area of approximately 4,500 km2.
The operator has identified multiple leads and targets on these permits. Drilling operations were recently completed at the Lambouka-1 well where gas was encountered in the Abiod Formation. However, as a result of down-hole problems, no fluid samples or gas flow were established. The well was suspended with the intention of re-entering at a later date and drilling and testing the reservoir in a sidetrack hole up-dip of the existing discovery.
Gulfsands has completed its earn commitments with respect to the Kerkouane and Pantelleria Permits with the drilling of the Lambouka-1 well. Gulfsands has earned a 30% working interest in both permits by paying approximately 35% of the cost the Lambouka-1 well and reimbursing the operator for a portion of various pre-drill costs that include a recently completed 3D seismic programme.
Chorbane Permit — Onshore Tunisia
The Chorbane permit is located in central Tunisia and covers an area of 2,428 km2. The permit is surrounded by several producing oil fields and extensive oil & gas infrastructure. Gulfsands’ forward work commitment for the Chorbane permit includes the drilling of one exploration well in the first quarter of 2011 for which Gulfsands will pay 80% of the first $5 million in drilling costs, and 40% of the drilling costs in excess of $5 million, so as to earn a 40% interest in the permit.
A number of prospects and leads have been indentified within the permit, the most prospective being a large tilted horst block (“Sidi Daher”) where the operator has identified multiple potential targets estimated to hold recoverable mean un-risked prospective resources of 175 billion cubic feet of gas (“bcfg”) and 44 million barrels of oil from Tertiary and Cretaceous aged reservoirs.
Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministry of Oil in Iraq for the Maysan Gas Project in Southern Iraq, following completion of a feasibility study on the project, and is negotiating details of a definitive contract for this regionally important development. The project will gather, process and transmit natural gas that is currently a waste by-product of oil production and as a result of the present practice of gas flaring, contributes to significant environmental damage in the region. The Company is actively engaged in discussions with respect to financing and potential equity partners. Gulfsands has no reserves in Iraq.
Gulf of Mexico, USA
The Company owns interests in 30 leases offshore Texas and Louisiana, which include 20 producing oil and gas fields with proved and probable working interest reserves at 31 December 2010 of 3.2 mmboe (figures adjusted for the disposal of non-core properties in December 2010).
Certain statements included herein constitute “forward-looking statements” within the meaning of applicable securities legislation. These forward-looking statements are based on certain assumptions made by Gulfsands and as such are not a guarantee of future performance. Actual results could differ materially from those expressed or implied in such forward-looking statements due to factors such as general economic and market conditions, increased costs of production or a decline in oil and gas prices. Gulfsands is under no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.