PetroNeft announced the discovery of another new oil field in License 61 at North Varyakhskaya.
North Varyakhskaya No. 1
The North Varyakhskaya No. 1 well at the North Varyakhskaya prospect located 6 km to the east of the Lineynoye Central Processing Facility was spudded on 17 August 2011. The well, which was drilled on the crest of the structure, has encountered approximately 2.2 meters of net oil pay in the J1-1 reservoir interval in a gross sand package of over 5 meters. There is also an additional 2.5 meters of potential oil pay in the J1-2 reservoir interval that will require more detailed logging and testing to confirm. A short open hole test of the J1-1 interval produced an inflow of 36 bfpd consisting of oil and mud filtrate. The oil is of good quality, 36 degree API, which is consistent with other oil fields in the License area. This preliminary test indicates that the reservoir will need fracture stimulation for economic development, as is usual in the area.
The field is located along the Lineynoye to Arbuzovskoye pipeline which is planned for construction in the first quarter of 2012, which will reduce development cost. Casing is currently being run in the well which will eventually be utilized as a producer. The field will also qualify for the maximum MET tax relief based on the new MET tax reduction law for small fields that becomes effective on January 1, 2012.
License 61 Development program
Two further successful development wells have been drilled from Pad 2 at the Lineynoye oil field. Well 209 encountered 9.6 meters of net pay. This well was the most northerly well drilled to date at approximately 500 meters further north than the 207 well that was drilled in early August 2011. Both wells were drilled at locations that had originally been interpreted to be outside the boundaries of the oil field and initially projected to have zero net pay. Given the successful results from the 207 and 209 wells we then added another location, well 211, to the northeast of well 207, again outside the original field boundaries. The 211 well encountered 17.9 meters of net pay, the second thickest net pay interval to date in the drilling program. We are studying the possibility of adding one well (No. 212) to this year's program at Pad 2 to enable us to drill the reservoir to the northeast of these two latest wells. In the meantime, we are currently drilling the 210 well which is located nearer the center of the Pad 2 area.
The Pad 2 drilling results indicate that the field wide oil water contact (owc) is at least 5 meters deeper on the structure than previously interpreted. The owc is about 12 meters lower than the interpreted structural spill point on the northern end of the field providing good evidence that the Lineynoye field extends much further north than previously estimated and possibly connecting the structures of the Emtorskaya high to Lineynoye.
License 67 Exploration program
Exploration at License 67 commenced on 28 August 2011 when the high impact Cheremshanskaya No. 3 well was spudded. The well is targeting objectives at the Upper, Middle and Lower Jurassic horizons following up on previously drilled wells where modern log analysis indicates potential "missed pay". The well is currently coring in the uppermost target horizon and hydrocarbon shows have been encountered. The well will take up to two months to complete drilling and testing of the three target objectives. Further updates will be provided as operations progress.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented, "We are very pleased to announce a new discovery at North Varyakhskaya. The field, while small in comparison to Sibkrayevskaya, is important because it can be easily tied into already planned infrastructure at minimal cost and will also qualify for a reduced Mineral Extraction Tax. The two well exploration program now underway at License 67 is based on re-interpreted data from old wells, similar to our recent significant Sibkrayevskaya discovery. We look forward to updating shareholders on the results of these wells as activities progress."
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