Hardman Resources: Remediation Plan in Place for Chinguetti Output

Mauritania Blocks Offshore West Africa
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Hardman Resources Limited provides the following update in respect of the production performance and plans for the Chinguetti oil field, offshore Mauritania, West Africa.

As previously announced, production for the period 1 to 10 May 2006 averaged 45mbopd. The average production for the period 1 to 29 May 2006 was 41mbopd, essentially from the four wells in the southern sector of the field. Recent short term production constraints have not impacted reserves and there is now a plan in place to remediate restrictions to field performance.

The Operator has proposed drilling three new producer wells in the southern sector as being the most effective way to restore oil deliverability. Subject to materials and equipment availability, the drilling of new production wells will take priority over the exploration program.

It is anticipated that the drilling of these new Chinguetti wells will start around October 2006 and options to accelerate this timing are being explored, including batch drilling of the new wells in advance of availability of completion equipment. The Operator advises that the well plans will be finalized by early July.

Progress has been made in resolving outstanding facilities issues. Following the failure of one of the three gas compressors in early May 2006, it is anticipated that the two undamaged machines, both upgraded, will be recommissioned this week. Operation of two out of the three compressors will allow gas lift of the production wells to begin and partial gas reinjection into the Banda reservoir to recommence. The damaged compressor is unlikely to be available before August. Until that time gas handling capacity remains constrained and gas flaring will continue. Additional options for de-bottlenecking the gas system to increase throughput are being examined.

Production is below the Operator's forecast, although the rate of decline has slowed significantly. Some further decline, mitigated by the provision of gas lift and by potential gas facilities debottlenecking, can be expected before production stabilizes in the next quarter. With the drilling of each new well, the production rate is expected to increase by an average of at least 10 mbopd, until natural decline commences. Further in-fill drilling, including resuming the remainder of the Chinguetti phase 2 drilling (part of the original development plan), will be undertaken in 2007.

The field Operator, Woodside, has confirmed that it has not amended its estimates of oil reserves as a result of these recent short term production constraints. Hardman is undertaking a reserves review with an independent third party, Netherland, Sewell & Associates Inc., to be completed by September 2006. This review will take into account the latest data, including the deeper-than-prognosed oil water contact, which directionally would increase the estimate of oil in place, as well as latest mapping of reservoir sand distribution. In light of recent well performance, additional wells are needed to recover the reserve volumes and this will involve additional costs.

All production figures reported above are gross.


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