KGP has the right to explore and produce hydrocarbons in the Sobin, Omorin and Beryambin license areas of East Siberia in Russia.
The Sobin license area, where more than 50 wells have been drilled to date, is estimated under the Russian system of reserve classification to contain C1 reserves of approximately 100 million barrels of oil(1) and condensate and 2.8 trillion cubic feet of gas(1); together equivalent to some 575 million barrels of oil(2).
The Omorin license area is currently being explored and, to date, 4 wells have encountered hydrocarbons.
Beryambin is an exploration area where no wells have been drilled to the prospective formations yet.
The Sale and Purchase Agreement is subject to the satisfaction of certain conditions precedent by no later than March 31, 2005. Due to the size and nature of the proposed investment in KPG, one of these conditions is shareholder approval. Subject, inter alia, to the completion of satisfactory due diligence, Emerald will send a circular to shareholders seeking such approval in due course.
Alastair Beardsall, Emerald's Chairman, said: 'For Emerald, this is a valuable opportunity to make a strategic investment. East Siberia has great potential to produce its vast reserves of hydrocarbons once export routes to Europe, China and the Pacific are available.'
Emerald is currently producing in excess of 1800 barrels of oil per day from its two producing wells: the Campo Rico #1 well in the Campo Rico Block and the Gigante #1A well in the Matambo Block located respectively in the Llanos and the Upper Magdalena basins of Colombia.
(1) In the Company's opinion, C1 reserves calculated under the Russian system of classification overstate those generally considered as probable under the SPE criteria; the C1 reserves quoted above have been reduced accordingly.
(2) Gas volumes have been converted using the ratio of 6,000 standard cubic feet to 1 barrel of oil.
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