Stratic submitted a bid for Block 17 in late 2002 and has been in exclusive negotiations with the Syrian authorities to finalize a PSC since mid-2003. The block is 5,076 sq kms in area and contains the underexplored southern limits of the Palmyra Fold Belt which extends onto the block from the north. The Palmyra Fold Belt to the north contains a number of significant petroleum traps in analogous structures on acreage held by the Syrian Petroleum Company ("SPC"), Marathon and INA. Under the terms of the PSC, Stratic will enter a first exploration term of 3 1/2 years with a work obligation comprising the acquisition of 625 line kilometers of new 2D seismic and the drilling of one firm exploratory well with a commensurate financial commitment to spend US$5.2 million gross. The PSC also contemplates two optional extension periods comprising a further 4 years and 3 years respectively with additional seismic and well commitments.
Under the terms of a separate agreement, KUFPEC will partner Stratic on Block 17 and hold a 33 1/3 % working interest in the PSC. Stratic will retain a 66 2/3% interest and Operatorship. It is Stratic's intention to find another partner for the exploration project and plans to divest an additional equity interest after formal signature and ratification of the PSC by the Syrian government, thereby retaining a 35% long term working interest in Block 17. It is expected that formal signature of the PSC will occur in April following the submission of Bank Guarantees to the Syrian authorities.
KUFPEC is a wholly owned subsidiary of the Kuwait Petroleum Corporation, one of the world's largest state-owned energy conglomerates, and operates and manages the foreign upstream exploration and production activities of the KPC. KUFPEC currently produces some 50,000 barrels of oil equivalent per day and is presently working in Algeria, Egypt, Sudan, Tunisia, Pakistan, Yemen, Qatar, Indonesia, Malaysia, Australia and China.
Stratic's General Manager, Tom Mackay, commented "it is encouraging that we are finally close to completing the signing of the Block 17 PSC and to commencing exploration operations in Syria. We are delighted to welcome KUFPEC as our partner with their wealth of experience in the North Africa and Middle East exploration arena and look forward to establishing a long and fruitful relationship with them in both Syria and beyond".
Pursuant to the terms of an agreement dated November 27, 2002 as amended with effect from November 27, 2004, Stratic will issue 1,888,283 common shares of Stratic to Petrofac Resources International Ltd within five business days after formal signature and ratification of the PSC by the Syrian government.
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