--The project has been producing positive operating cash flow since May --Consistent incremental oil production from a number of Beshkent wells --Additional injection being initiated at Togap --Full scale expansion of the project under consideration.
Beshkent-Togap Water Injection Project
Water injection commenced at 2 wells in October 2005 with the objective of increasing oil production in the immediately adjoining production wells at the Beshkent end of the field.
Regular well testing has been undertaken since October to detect and monitor responses at the adjoining oil production wells. This testing guides the Company's plans to expand the project across the whole field, which contains about 60 producing oil wells. Operational performance is now improving and incremental oil is being consistently recorded in ongoing well tests.
Incremental oil has now been recorded from a number of producing wells
Well 25 has produced since February at about 3 times the agreed base level from which incremental oil is calculated. Well 66 has now produced incremental oil at 50%-100% above the base rate for several months. Four other wells have recorded incremental oil at lower rates.
Replacing pumps and packers to increase water injection volumes
COIL is taking steps to increase the level of water injection by installing new pumps and high pressure packers on the injection wells to increase water injection volumes. These actions are expected to improve performance. Additional wells in the test area may be converted to injectors.
Project in positive operating cash flow mode
Gross incremental oil production for May, June and July (after deducting accumulated oil debits for the converted injection wells) is now being finalized with Kyrgyzneftegaz and the net cumulative incremental volume is expected to be about 1,000 barrels. COIL's initial 70% share of this incremental oil is being accumulated for sale in the near future. The Company will record its first positive income from the sale of COIL's share of this incremental oil production and after allowing for accumulated operating costs.
While this initial volume may be seen as relatively small, it needs to be considered in the light of the equipment constraints described above and operational downtime during the start-up period. Operational performance is now improving and the results are building confidence that the project can be scaled up commercially across all of the wells on the field.
Project expansion in the Togap area of the field
Based on the progress in the Beshkent test area and given increases in local petroleum prices, COIL has agreed with Kyrgyzneftegaz to fund rehabilitation of previously abandoned injection facilities in the Togap area of the field. Kyrgyzneftegaz previously established injection in the Togap area of the field in the late 1980's but this project fell into disrepair. This expansion is now underway and will provide a low cost extension of the project.
Future project expansion
COIL and Kyrgyzneftegaz are considering possible plans to expand the project to a full field basis. Further discussions are expected to map out forward development options. The parties will keep further expansion commitments under review in the context of ongoing well test results.
Neale Taylor, Chief Executive Officer of Cambrian Oil and Gas Plc, said:
"The Beshkent-Togap project is now showing progress. Latest results are encouraging, it is pleasing that the project is now generating positive operating cash flow, and we look forward to working with Kyrgyzneftegaz to expand the project in the future."
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