Amerisur provided the following update on operations in Colombia.
As reported previously the production enhancement program in the wells Alea-1 and Platanillo-2 has been successful. Despite down-time caused by mechanical failures and other issues on the Oleoducto Transandino, the oil pipeline running from Orito to the Pacific port of Tumaco, production has been maintained and continues to deliver 550 BOPD. Oil sales generated a net US $1.14 million during September 2010.
Expansion of Production Facilities
The Company has brought forward a significant part of the production facilities expansion, previously planned for mid-2011. This expansion includes the installation of a further 3,000 bbl of production tankage, a water evaporator system and additional piping to ensure the system can flexibly handle production from various sources. The evaporator system uses natural gas from the production process, which is normally flared, to evaporate produced water, thus reducing the volume which has to be treated before disposal. Besides being environmentally responsible, this will have a positive impact on installed water handling capacity and also help to reduce operating costs in the future. The first two 500 bbl tanks are now at location and rig up is continuing. The remainder of the equipment will be installed in the coming weeks, without impact on production.
3D3C Seismic Acquisition Program
The seismic program is progressing to schedule. It is expected that the recording of data in the southern section of the data volume will be completed during November, with well locations identified in time for drilling early in 2011.
Fenix Contract - Iguasa-1
As reported previously, the Company has designed and applied a number of chemical treatments to the reservoir intervals under test in Iguasa-1 over the past months. Those treatments were successful and indicated a reduction in formation damage with an associated improvement in near-wellbore permeability. Subsequently the Company performed a series of sustained drawdown tests with a hydraulic lifting system. A pressure build up test was then recorded with down hole gauges. The data from these tests were analyzed by a specialist consultancy, Fronterra Geosciences, and the initial results were received in early October.
The analysis indicated that the perforated intervals have now been cleaned up and demonstrate a near zero skin factor. However it also indicated an abnormally low effective permeability when compared to Isabel-1 and other offset wells in similar formations. The reason for this is as yet unclear and further analysis is required to resolve this conflict.
During this test, oil was produced intermittently at rates of up to 30 BOPD from the entire perforated interval. These rates, whilst confirming that we have achieved a technical success with this discovery, do not yet demonstrate that oil can be recovered at commercial flow rates from this part of the structure.
The results of this recent work underline that Iguasa-1 is drilled into a very complex structure. That complexity needs to be better understood in order to define the technical work required to increase productivity and also to determine the locations and objectives of potential further wells in the structure.
The latest phase of testing at Isabel-1 has demonstrated a gradual decline in production levels to approximately 30 BOPD. The operating parameters of the mechanical pumping system are now being adjusted with the objective of increasing and stabilizing production. The Company is currently refining the operating cost structure to ensure economic operation at these production levels. An important technical conclusion from this stage of testing is that the reservoir quality at this level is good, displaying excellent permeability and porosity.
The Isabel discovery was not predicted on the original pre-drill prognosis, and was encountered while drilling Iguasa-1. The play had been previously identified in the block from seismic interpretation, but had been mapped as commencing further to the north. The Company is currently evaluating the geological model to assess the potential extent and continuity of this trap, in order to define the potential for further wells to drain the currently producing reservoirs, and the possibility of adding further productive intervals at the level of the Isabel discovery, through an optimized design geometry in future wells.
Future Outlook and Strategy
The complexity of the Fenix structure at both the Iguasa and Isabel levels requires further study and testing to establish the potential of the accumulations we have encountered. To that end the Company has commissioned a detailed surface geological analysis together with an integrated study which will be performed by Fronterra Geosciences. That study will encompass all aspects of the data collected to date. The objective of the study is to resolve inconsistencies in the observed results and so better inform the future technical and contractual decisions within the block. It is expected that the study results will be available during the first half of 2011. The Company does not currently plan to invest significant further funds in the block until the outstanding questions have been addressed and a long term strategy for the northern part of the block is defined. In undertaking the initial evaluation, Fronterra Geosciences have added to their existing understanding of the area, and the Company believes this exposure, coupled with the wide technical expertise available through Fronterra Geosciences, will assist in the timely and accurate delivery of the study objectives.
In the meantime, it is expected that the Fenix wells will continue in Long Term Test. All current contractual obligations have been satisfied in the block, and no further capital expenditure is required until mid-2012, when the Company has a commitment to acquire 50km of 2D seismic data. The estimated cost of that work is less than US $1 million.
The Company intends to push forward the 3D3C program in Platanillo to ensure the early identification of high value well locations, in order to commence drilling the first of 6 planned wells early in the New Year. Additionally, work is underway to have all necessary operational and contractual details in place to ensure that the increase in production from this field delivers maximum value.
John Wardle, CEO, said, "The remedial work we have performed on Iguasa was successful in removing the formation damage caused during the drilling process; however the apparent permeability of the intervals remains low, in direct contrast to the behavior of the same geological units in the Isabel well. I believe the study led by Fronterra Geosciences is essential to resolve this issue and define the way forward. The Exploration and Production Contract is in good standing and we have sufficient time to understand the situation prior to making any further investment decisions.
"Meanwhile our work at Platanillo to develop the full potential of the field continues to deliver success, and I look forward to the results later in the year of the exciting 3D seismic program currently underway in that field."
Giles Clarke, Chairman, said, "I believe our strategy will continue to create success for the Company, in particular I was most impressed at the physical progress made in the Platanillo field during a recent visit to the area. I look forward to updating shareholders as our exciting program continues to develop."
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