Operations are continuing on the Norio MK72 well. After drilling into the Middle Eocene primary target zone, the bottom hole assembly ("BHA") became stuck in the reservoir section, and despite repeated attempts to free the assembly it has not been possible to do this and as such the lower section of the hole is now to be plugged back and the higher Oligocene sand section is to be tested.
The hole reached a depth of 4,900 meters (16,076 feet) in the Middle Eocene reservoir having encountered very good oil and gas shows. Gas levels up to 21% were recorded at surface, as well as light oil in the mud and hydrocarbon fluorescence in the cuttings samples. Inflow was observed and it appears that the small diameter hole collapsed around the bit. Although it may be possible to mill down the BHA and to sidetrack the hole, the small hole diameter and unstable hole conditions means that there is a high risk that such an operation would not be successful and could take an indeterminate time. As such it has been decided to plug back the lower part of the hole and to concentrate on testing the oil-bearing Oligocene sands which were the secondary target for the well. From the data obtained from the Middle Eocene (the primary target for the well) CanArgo believes that an oil discovery has been made at this level, and that the reservoir has exhibited both permeability and the presence of movable light oil. As such, even though the Middle Eocene has not been fully evaluated, the MK72 well has encountered the Middle Eocene reservoir on prognosis, and with hydrocarbons discovered thus achieving many of the objectives of this wildcat exploration well. The Norio Middle Eocene prospect as mapped is potentially large, with an areal extent at least as large as the nearby Samgori Field (which is reported to have produced over 180 million barrels of oil to date) and with flow rates of previous Middle Eocene wells in the Norio block having been reported to have exceeded 10,000 barrels per day. It is planned that an appraisal well will be drilled to fully evaluate this Middle Eocene discovery sometime next year, with the well being designed to enter the Middle Eocene reservoir with a larger hole size.
The Oligocene sands which are now to be tested in the MK72 well had good oil shows whilst drilling, with oil to surface and with hydrocarbons being interpreted on the electric logs which indicated some 100 meters (330 feet) of net pay sands with porosities in the range of 15 to 20%. It is planned to set a cement plug in the lower part of the hole, and then to perforate these sands under-balanced in several runs using high penetration tubing conveyed perforating guns. Given success the well would be placed on test production. The testing will be carried out using CanArgo Rig#1, and is expected to commence towards the end of January 2006.
The Saipem rig which has been drilling the lower section of the MK72 well will now be demobilised and moved to the Manavi M12 appraisal well location where CanArgo Rig#2 is currently drilling the surface hole section. It is expected that the Saipem rig will be on the M12 location within the next month, at which point it will take over drilling the well to the planned total depth of 4,600 meters (15,092 feet), with a planned completion date in May 2006.
On the Manavi M11Z appraisal well, negotiations are being finalized with Schlumberger to carry out an acid stimulation and re-completion on this well using a Schlumberger coiled-tubing unit, pumping equipment and completion fluids. Subject to finalising the contract with Schlumberger it is expected that testing will re-commence in the M11Z well during March 2006.
The latest horizontal well on the Ninotsminda Field, well N97H is currently drilling ahead in the build-up section at a depth of 2,538 meters (8,327 feet). A further casing string will be set before entering the horizontal section in the reservoir, and it is planned that this well will be completed before the end of January 2006.
In Kazakhstan the latest development well on the Kyzyloi Field, well KYZ106, has successfully flowed gas, with the well currently being tested at similar rates to previous wells. One further well (KYZ109) remains to be tested for the initial phase of the Kyzyloi gas development. In the exploration program the final stabilised test rate from the AKK05 exploration well (now named North-East Kyzyloi) was 233,000 cubic meters (8.23 million cubic feet) per day of dry gas on a 30 millimeter (76/64 inch) choke. The well is now preserved for future tie-in to the greater Kyzyloi development. The next exploration well AKK02 is currently drilling ahead towards the prognosed reservoir.
Vincent McDonnell, Chief Operating Officer of CanArgo commented; "We are very pleased to have found oil in the Middle Eocene in Norio. A number of large prospects and leads have been mapped in the block, and the discovery of hydrocarbons in the primary reservoir gives us confidence that significant potential does exist at this level. Obviously we are disappointed that we could not complete the evaluation, but drilling at the current depth of 4,900 meters (16,076 feet) using slim hole drilling technology was always going to be a challenge. I believe that this goal will be best achieved in an appraisal well next year using a high specification rig, such as the Saipem rig, equipped with an oil-based mud system, to drill the majority of the well, in particular the whole of the highly overpressured clay section, which should result in a larger hole size at the primary target level. In the meantime, we look forward to the Oligocene test, where we are testing a thick interval of what appears to be reasonable quality oil bearing sandstones, with the potential for early production. Our Manavi program continues to move forward both with the drilling of the M12 appraisal well, and firming up of our plans for the completion of testing on M11Z. We have chosen Schlumberger to undertake the work on M11Z in order to have the best equipment and services to carry out this important test."
CanArgo is an independent oil and gas exploration and production company with its oil and gas operations currently located in the Republic of Georgia and the Caspian area.
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