Gulf Keystone to Test GRJ-2 Well on Block 126A in Algeria

Block 126A - Algeria
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Gulf Keystone has completed drilling, coring and logging operations at the GRJ-2 well on Block 126A in north eastern Algeria. Technical evaluation of the data received from the company's third party consultants has indicated that there are three separate potential reservoir intervals which may have the potential to contain hydrocarbons.

A testing program for GRJ-2 will be implemented once Gulf Keystone's experts have completed the design of the testing program and confirmed the availability of the required equipment. The directors believe that the testing program could involve fracturing of the indicated reservoir sections which is intended to increase the potential to intersect open fractures.

The processing of the 460 square kilometer 3-D seismic survey in the southwest of Block 126A, acquired in 2005 by Gulf Keystone, is now complete and the Gulf Keystone team will be using this 3-D to map and interpret the reservoir in order to select a location for drilling in 2006.

The application for a production license for the GKN field is progressing. Gulf Keystone has made what the directors hope and believe to be the final submission of documentation to the joint Sonatrach/Gulf Keystone management committee for Block 126 A . The information has been passed to Sonatrach and Gulf Keystone is working with Sonatrach to seek the final approval for the license from the Algerian Ministry of Energy and Mines.

As a result of the Gulf Keystone's successful well test on the GKS-2 well originally drilled and successfully tested as a discovery well by Sonatrach, Gulf Keystone has initiated the process of submitting an application for an early production license on the GKS field which is an initial step for a permanent production license and a field development plan. The company will be working with Sonatrach through the Sonatrach/Gulf Keystone management committee to seek the approval for a short term production license from the Ministry.

Block 129 (Gulf Keystone 100%)

Gulf Keystone is calling for tender for the processing and interpretation of 412 Km2 of 3-D seismic acquired by Sonatrach in 2005 before Gulf Keystone was awarded the Block in the 6th International Bid Round. The analysis of available geological and geophysical data on four (4) existing discoveries previously identified by Sonatrach and approximately 5300 kilometers of 2-D seismic acquired by Sonatrach which identified an additional twenty-two (22) leads will be used to develop an appropriate ongoing work program for Block 129.

Blocks 108/128 (Gulf Keystone 100%)

Gulf Keystone has completed processing 153Km2 3-D seismic acquired by Gulf Keystone in the 3rd quarter of 2005 over the existing Ras Tomb oil field previously discovered and produced by Sonatrach. The acquisition of this 3-D seismic fulfils the minimum work program for 3-D seismic under the first term of the contract for Blocks 108/128. The purpose of the 3-D seismic acquisition over the Ras Tomb field is to seek to more highly define the reservoir and the field so that Sonatrach/Gulf Keystone can identify appropriate locations for drilling new wells for additional field development.

Gulf Keystone will also evaluate the existing Sonatrach discovery on the OSD structure and the 4457 kilometers of 2-D seismic previously acquired by Sonatrach to develop a work program to assess Blocks 108/128.

Hassi Ba Hammou Perimeter (Gulf Keystone 100%)

Gulf Keystone's technical staff, in conjunction with our partner Sonatrach and consultants, have been analyzing 3rd party data on this permit which consists of 5 Blocks covering approximately 18,000 square kilometers in the gas producing western region of Algeria. Specifically, Gulf Keystone has been focusing on the HBH discovery made by Sonatrach. This field was discovered by the HBH-1 well and successfully appraised by the HBH-2 and HBH-3 wells. A 3-D seismic acquisition program and an appraisal drilling program are being designed for the further appraisal and development of this discovery.

Further, the company is reviewing approximately 4703 kilometers of existing 2-D seismic previously acquired by Sonatrach in respect of an additional ten (10) potential leads identified by Sonatrach and Gulf Keystone to assess any further upside potential of the permit area.

Portfolio Management

Gulf Keystone has engaged Tristone Capital Limited, an advisory firm specializing in the oil and gas industry, to advise it in relation to the possibility of bringing in a potential partner or partners into a number of the company's Algerian assets. The strategic purpose of this process is to seek to bring in a partner or partners that can assist the company in the acceleration of the commercialization of its current portfolio of assets while enabling Gulf Keystone to not only manage its future financial commitments but also take advantage of the opportunities that exist for Gulf Keystone to build and widen its asset portfolio within the region.

Todd Kozel, Chief Executive Officer of Gulf Keystone Petroleum said:

'Our operations in Algeria are developing well after another busy period for Gulf Keystone Petroleum. I believe that the company can look forward to 2006 with renewed optimism as we deliver on our strategic plan.'


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