Drilling has commenced on the No. 6 well in the Lineynoye Oil Field. Due to unusually warm weather conditions in Western Siberia, there has been some delay in getting all necessary equipment to the drill sites on the Lineynoye and Tungolskoye Oil Fields on License 61. As a result, there has been some slippage in the planned time frame of commencement of drilling. However, this is not expected to have any significant impact on the cost of the wells, the timing of final results or the full completion of the three well drilling program as planned for 2007. To ensure that all wells are completed as planned, a third rig is being mobilized to drill the Lineynoye No. 7 well.
The 2006/2007 Winter seismic program is proceeding on schedule, with 450 kms, of a total of 540 kms, already acquired. The program is expected to be completed in mid-March.
Lineynoye and Tungolskoye Drilling Program
The Lineynoye and Tungolskoye Oil Fields were originally found by a Soviet Exploration Company in the early 1970s. Independent Petroleum Consultants, Ryder Scott Company, have calculated the Proved and Probable Reserves of the two fields to be 33.5 million barrels of oil. The two planned delineation wells, Lineynoye No. 6 and Tungolskoye No. 4, are designed to confirm the reservoir data of the 1970s discovery wells and provide further input into a Final Development Feasibility Study, expected to be completed in the 3rd/4th quarter of 2007. The results of the high value exploration well, Lineynoye No. 7, will also provide input into the Final Development Feasibility Study.
Lineynoye No. 6 Well
The Lineynoye No. 6 well on License 61 was spudded on March 4th 2007. The principal target horizons for this well are Upper Jurassic sandstone reservoirs, at a depth of 2,390 meters. The total planned depth for the well is approximately 2,750 meters and it is anticipated that the well will be drilled, logged and tested within approximately 70 days of commencement.
Tungolskoye No. 4 Well
Site preparation and mobilization of a second drilling rig to the Tungolskoye Oil Field has been completed and assembly of the rig is underway. Drilling is expected to commence on Tungolskoye No.4 well in late March/ early April. The principal target horizons for this well are again the Upper Jurassic sandstone reservoirs, at a depth of 2,490 meters. The total planned depth for the well is approximately 3,100 meters and it is anticipated that the well will also be drilled, logged and tested within approximately 70 days of commencement.
Lineynoye West Prospect. Lineynoye No. 7 Well
West Lineynoye, a high-impact prospect, is estimated by Ryder Scott to contain Possible Reserves of approximately 67 million barrels of oil. In order to complete the scheduled drilling of this target during the currrent drilling season, a third rig has now been mobilized to the site and is expected to commence drilling in May. Drilling pad preparation is underway on the site. The principal target horizons for this well are again the Upper Jurassic sandstone reservoirs, at a depth of 2,375 meters. The total planned depth for the well is approximately 2,750 meters and it is anticipated that the well will also be drilled, logged and tested within approximately 70 days of commencement.
The 2007/2008 winter seismic program, to acquire an additional 540 kms of high resolution 2D seismic data, is proceeding as planned. Approximately 450 kms of data has been acquired to date and it is currently expected that this acquisition will be completed by mid March. This program is designed to upgrade the definition of known prospects on the license. The results will be used in designing the 2007/2008 Winter drilling program and will also be used in the Final Development Feasibility Study.
Development Feasibility Study
A Preliminary Feasibility Study for the development of the Lineynoye and Tungolskoye Oil Filelds has now been completed by a Russian Institution. The purpose of the Study is to evaluate the oil reserves and the economics of the oil fields and will be used as part of the approval process required for development in the Tomsk Oblast and the Russian Federation. As stated above, the results of all three wells and some of the current seismic acquisition, will be incorporated into a Final Feasibility Study, which will be used for final approval of the project and for development financing purposes.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:
'We are delighted, given delays created by the unusually warm weather in Siberia this winter, to have our three well drilling program back on schedule. Bringing in the third drilling rig should allow us to complete of our planned program on schedule with no significant increase in cost.
"We remain excited about the prospects on License 61. The two wells at Lineynoye and Tungolskoye are designed to firm up our reserves base and help prove the production viability of these fields; whilst West Lineynoye is a high impact exploration well that could seriously change our reserves base.
"We look forward to updating the market on the results of these wells and how they fit into our overall objective--exploiting License 61 as an oil producing core area."
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