Sterling has begun the process to drill a well on Block 42/13 in the Southern North Sea, to follow up a 1997 carboniferous gas discovery on the Block. Recent interpretation by Sterling's consultants indicates that the discovery well was drilled down dip from the structural high. This new well will be located up dip on the interpreted main structure. A proposal to drill the well on a turnkey basis including mobilization, drilling, casing and logging has been received from ADTI, a subsidiary of Global Santa Fe that specializes in drilling management and rig procurement, and applications for regulatory approvals are underway. Sterling currently has a 75% interest in this Block having farmed out a 25% interest under which the farmee will pay 50% of the costs of drilling the well. A further interest in this well may be farmed out prior to drilling.
The well on Block 21/23a in the Central North Sea is currently scheduled to begin drilling in December, but the exact timing is dependent on other wells currently scheduled to be drilled by Oilexco's contract rig, the Sedco 712, before it moves to 21/23a. Oilexco is paying 95% of the well cost to earn a 65% interest in the Block and Sterling is paying 5% of the well cost and will retain a 35% interest. The well is targeting an Eocene Tay Sand similar to the nearby Pict field.
There have been several developments on the Northern North Sea Blocks 210/29, 210/30 and 210/25b. Negotiations on the proposed farm in by Lundin Heather, for a 40% interest in the Blocks were terminated. Sterling applied for a continuation of the licence covering Blocks 210/30 and 210/25b for a third year and to be recognized as an Exploration Operator, both of which were granted by the U.K. Department of Trade and Industry. The recognition as an exploration operator is a milestone in Sterling's growth in the U.K. offshore. Also, continuing geological and geophysical work on Block 210/29 has identified a larger prospect on a terrace at shallower depth, in the same Upper Jurassic formation as the high amplitude events on the deeper prospects in Block 210/30. Plans are now to carry out a 40 square kilometer 3D survey to infill the existing surveys, which will be followed by a well in 2006, subject to rig availability, and discussions are underway with potential farm in parties. Sterling currently has a 60% interest in all these Blocks.
Technical work on the remaining blocks acquired in the 22nd Offshore Licensing Round is expected to be completed by year end. In addition, as previously reported, Sterling was awarded seven North Sea Blocks in the UK 23rd Offshore Licensing Round. These Blocks are located in the Northern, Central and Southern North Sea and are in close proximity to Sterling's existing North Sea Blocks. Sterling now has interests in 17 Blocks in the North Sea.
Sterling recently completed a 185 kilometer seismic program in the south-east portion of its 1.5 million acre concession in Romania in which it holds a 60% interest. The program was initially planned for 120 kilometers but was expanded to cover some additional areas of interest. This seismic program has generated good quality data and a review of the unprocessed lines indicates both structural and stratigraphic leads. Processing and interpretation is underway and is expected to be completed prior to year end, following which, a multi-well exploratory drilling program will commence.
Sterling has strengthened its management team and has the addition of Mr. John Rapach as Vice President Operations of Sterling Resources (UK) Ltd. and Mr. Ian Hornby-Smith as Chief Financial Officer of Sterling Resources Ltd.
Mr. Rapach is a Petroleum Engineer with over 24 years of operations experience in both offshore and onshore environments. He is an industry renowned specialist in the preparation of reserve assessments, well testing, field development and performance enhancement. He will be based in the Aberdeen office and be responsible for operations on all of Sterling's properties.
Mr. Hornby-Smith is a Chartered Accountant with over 25 years of international financial experience, concentrated in the upstream oil and gas sector, where he has held senior financial positions. He will be located in the Calgary office and have responsibility for all of Sterling's financial activities.
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