Gulf Keystone Provides Exploration Update in Shaikan

Source: www.gulfoilandgas.com 4/30/2012, Location: Middle East

Gulf Keystone provides an update on its ongoing exploration and appraisal programme in the Kurdistan Region of Iraq, which includes the Shaikan block, a major discovery with independently audited gross oil-in-place volumes of between 8 billion barrels to 13.4 billion barrels calculated on the P90 to P10 basis, with a mean value of 10.5 billion barrels.

Shaikan-4 Appraisal Well
Following the conclusion of the successful Shaikan-4 well testing programme, the appraisal well, drilled 6 km to the west of the Shaikan-1 discovery well, will be completed as a producer and tied to the Shaikan-1 and Shaikan-3 Extended Well Test facility. The Discoverer-4 rig has been released and will move from the Shaikan-4 location to the drilling location of the Sheikh Adi-2 exploration well.

Shaikan-5 Appraisal Well
The Shaikan-5 appraisal well, drilled 6 km to the north-east of the Shaikan-2 appraisal well, has been sidetracked (Shaikan-5B) and casing has been set at the depth below 3,400 metres in the Kurre Chine-B formation in the Triassic. Preliminary well logs indicate a continuous oil column in the Jurassic and hydrocarbon presence in the Triassic Kurre Chine-A and Kurre Chine-B, which is consistent with results obtained elsewhere in the field, most recently with the Shaikan-4 appraisal well. The well will continue drilling to the estimated total depth ("TD") of 3,750 metres, subject to technical conditions.

Shaikan-6 Appraisal Well
The Shaikan-6 appraisal well, 9 km to the east of the Shaikan-2 appraisal well, has drilled to the depth of 3,455 metres in the Kurre Chine-B formation in the Triassic where casing has been set. A preliminary evaluation of the comprehensive logging suite indicates a continuous oil column in the Jurassic Barsarin, Sargelu, Alan and Mus formations and extending into the Butmah formation. Well logs from the Triassic indicate the hydrocarbon presence in both the Kurre Chine-A and Kurre Chine-B formations.
Shaikan-6 has recorded the deepest oil shows so far as indicated by both logs and core samples obtained by the Company. These oil shows have been recorded below the Company's originally prognosed Jurassic oil/water contact level for the Shaikan structure. A testing programme is planned to verify the deeper oil potential. The well will continue drilling to an estimated TD of 3,800 metres, subject to technical conditions.

Shaikan Extended Well Test
As part of the ongoing Extended Well Test ("EWT") on the Shaikan block, the output from the Shaikan-1 & 3 EWT facility has reached 442,592 gross barrels of oil from 1 January 2012 to 28 April 2012. A total of 187,884 gross barrels of oil has been produced in March and 156,428 gross barrels of oil in April to 28 April 2012. Work is ongoing to upgrade the existing Shaikan-1 and Shaikan-3 EWT facility, in parallel to the design and construction of a new EWT facility for the Shaikan-2 location.

Shaikan Field Export Pipeline Project
Technical evaluation is underway of bids submitted in response to the tender for the materials procurement for the Shaikan field export pipeline project, with commercial evaluation to follow. In addition, bids are currently being received as part of the ongoing tendering process for the export pipeline site construction and installation. Gulf Keystone is the Operator of the Shaikan block with a working interest of 75 per cent and is partnered with Kalegran Ltd. (a 100 per cent subsidiary of MOL Hungarian Oil and Gas Plc.) and Texas Keystone Inc., which have working interests of 20 per cent and 5 per cent respectively.

Sheikh Adi-2 Exploration Well
The drilling location for the second exploration well on the Sheikh Adi block, north of the Sheikh Adi-1 exploration well, is currently being prepared. Sheikh Adi-2 is expected to spud in June 2012, after the Discoverer-4 rig has arrived from the Shaikan-4 location.
Gulf Keystone is the Operator of the Sheikh Adi block with an 80 per cent working interest, while the Kurdistan Regional Government has a 20 per cent carried interest. In August 2011, an independently audited preliminary resource evaluation of the Sheikh Adi block, located immediately to the west of the Company's Shaikan block, has indicated a significant range of between 1 billion barrels and 3 billion barrels of gross oil-in-place volumes calculated on the P90 to P10 basis, with a P50 estimate of 1.9 billion barrels.

Akri-Bijeel Block: Aqra-1 Appraisal Well
The first appraisal well to assess the Bijell discovery on the Akri-Bijeel block is being drilled 8 km to the north-west of the Bijell?1 discovery well. Currently, Aqra-1 is at a depth of 2,273 metres in the Cretaceous where logs are being acquired prior to running 13 3/8" casing. The well will drill to an estimated TD of 4,700 metres in the Triassic subject to technical conditions.

Gulf Keystone has a 20 per cent working interest in the Akri-Bijeel block, operated by Kalegran Ltd., a 100 per cent subsidiary of MOL Hungarian Oil and Gas Plc., which holds 80 per cent working interest in the block. The operator's P50 resource estimate for the Bijell discovery is 2.4 billion barrels of oil-in-place, while the ongoing 2012/13 exploration and appraisal programme is targeting existing and identified hydrocarbon prospects in the Akri-Bijeel block.

Ber Bahr-1 Exploration Well
A well testing programme has commenced for Ber Bahr-1 after the first exploration well on the Ber Bahr block reached its TD at 3,930 metres, with results expected in summer 2012. Gulf Keystone has a 40 per cent working interest in the Ber Bahr block, operated by Genel Energy, which holds a 40 per cent working interest in the block. The Kurdistan Regional Government has a 20 per cent carried interest in the Ber Bahr Production Sharing Contract. The Operator's resource estimate for the Ber Bahr block is 1.5 billion barrels of oil equivalent-initially-in-place.

John Gerstenlauer, Gulf Keystone's Chief Operating Officer commented: "Our operations are progressing across the four blocks in the Kurdistan Region of Iraq. In addition to the outstanding 24,000-bopd results achieved with the Shaikan-4 appraisal well, Shaikan-6 has cored oil 150 metres below what we previously assumed to be Jurassic oil/water contact level for Shaikan. Both Shaikan-5 and Shaikan-6 continue to appraise this massive structure down the flanks and we plan to test and evaluate its deeper oil potential. Stable output from the Shaikan extended well test has now surpassed our initial target of 5,000 bopd and is set to increase with work underway to upgrade the existing EWT facility and design and construct a new facility for Shaikan-2. A long-anticipated second exploration well on the Sheikh Adi block will spud in June, when results of the Ber Bahr-1 testing programme are also expected."


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