The development work will be carried out by Magma Oil Company ("Magma"), a Sibir subsidiary, which owns the rights to the field and operates the Yuzhnoye oil field 22 kilometers to the southeast from which it produces over 7,000 bopd.
Initially the field development is expected to require $95 million of capital expenditure to build out infrastructure and drill 22 wells by 2009. The project is expected to be self-funding in 2010 and achieve payback in 2011.
Having already completed construction of a winter road to Orekhovskoye, Magma is now moving a drilling rig onto the field. Infrastructure development will include construction of two well pads, an infield road, a power substation, power lines to the pads and a 22 km pipeline to the existing Central Processing Facility (CPF) at Yuzhnoye where crude will be brought to Transneft specification for transport.
Magma expects to spud its first well in January, 2007 and put it on stream in February. Cumulative production is expected to reach 200,000 barrels by year-end from seven new wells to be drilled, completed and streamed over the course of the year and from existing exploration wells to be recompleted and fracced in the same period.
Commenting on the announcement, Sibir CEO, Henry Cameron, said, "By using the existing infrastructure and personnel at Magma's Yuzhnoye oilfield Sibir will contribute incremental production at minimal cost. "
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