The Lam and Zhdanov fields are remarkable in having extremely long hydrocarbon bearing sections, for example in Lam 22/101 well logs indicate 310 meters of net sand reservoir over the interval 2,200 meters to total depth at 3,795. The deepest level to which hydrocarbons have been encountered in the Lam field is 4,600 meters and even at this point, the oil water contact had not been reached.
Production from the new Lam 22-101 well continued during the past week, however the well was shut in for safety reasons while the rig was skidded over the new drill slot. Flow rates reached 2,000 bpd (250 tons/day), plus 19 million cubic feet of gas per day (540,000 m3), at a pressure of 4,100 psi. As expected, the level of oil production increased as gas volumes declined and the rate is expected to increase further when the well is produced into the 10' pipeline. This is being installed between Lam 22 platform and the main trunk line to shore and will replace the existing 4' line which is currently constraining production. Total production from the field since the completion of Lam 22/101 has reached 8,400 bpd (1,100 tons/day).
Now that Dragon has demonstrated the reserves can be economically produced from this reservoir using conventional technology, the Company is focusing on the full field development plan. In addition to continuing with the drilling program, onshore and offshore production infrastructure needs to be built or upgraded. Part of this plan was successfully completed during July with the installation of the new accommodation platform alongside the existing Lam 22 facilities. In due course the Lam 22 complex will become a central accommodation, production and control center for the Company's offshore operations.
Dragon has been producing around 7,000 bpd from 18 pre-existing wells on the field and it is anticipated that production from the field could be increased ten-fold in the coming years through the drilling of new wells. By world standards, the Lam/Zhadanov accumulation is a giant oilfield with certified proven plus probable oil reserves of approximately 600 million barrels and 2.3 trillion standard cubic feet of gas. Dragon holds 100% of the foreign equity in the production sharing agreement, which has a 25 year initial term.
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