A Letter of Understanding was formalized between Calvalley, its joint venture partners and the Yemen Ministry of Oil recognizing the value to all parties in achieving early production from Block 9 before the end of 2005. In addition, approvals were received from the Block 9 Operating Committee related to the acquisition of a number of key goods and services required for the early production facility ("EPF").
Key components of the EPF, including tanks, pumps, wellheads and associated production equipment, have been purchased and are enroute to Block 9. The Company intends to initiate production from one or two Hiswah wells prior to completing construction of the EPF, as this goal can be achieved with the equipment already in Yemen. The land for the Hiswah complex was surveyed in late October with construction anticipated to commence later this month. All necessary line pipe required to tie in the Hiswah wells and build the gathering system, has been ordered. Finally, negotiations are underway for delivery of oil to an export pipeline and agreement has been reached for the use of a trucking firm to transport Hiswah crude to the export pipeline until such time as a pipeline is constructed.
The Hiswah-7 horizontal well was spudded on October 30th and is anticipated to finish drilling near the middle of this month. Tenders for a second drilling rig, a workover rig, and various drilling services have been completed and were sent to out to bid in early November. Bids are expected by early December with the process finalized by late this year.
Geological and geophysical appraisal and development activities are currently focused on the Hiswah structure, with particular attention to the mapping of the faults affecting the Saar-Naifa horizon and incorporation of the 3D seismic interpretation. In addition, preliminary interpretation has been completed of the Qishn horizon at Hiswah, using the 3D seismic. Work is also being done on the potential re-entry of the Qarn Qaymah discovery well, in addition to a proposed Qarn Qaymah-2 appraisal well. Development activity at Qarn Qaymah is being driven by the potential synergy with the development of the Al Roidhat field, where new 2D seismic information is being integrated with the existing seismic data.
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