The temporary curtailment of production is expected to allow time for receipt of revised government guidelines relating to the flaring of associated natural gas produced from the field. The company has received government approval for a project that will allow it to supply its gas production to a local manufacturing facility. Arrangements for delivery of the gas to the facility are expected to be operational by early November 2007, and, therefore, the company has asked the government to grant temporary relief from the limitations on flaring of associated gas. Limitations on gas flaring are being applied to all producers in the area, and the company has been advised that the government-working group responsible for this issue is being reconvened to reconsider flaring restrictions. In connection with that process, the company expects to receive the requested relief; however, no assurance can be given that such relief will be granted or when it will be effective. If relief is not received, the company may be required to continue curtailment of production from the field until the gas utilization plan is implemented or continue to flare gas subject to imposition of fines, which may be substantial.
"Completion of and changeover to our new, permanent production facilities is an important step toward being able to maximize the export sales prices received for crude oil production from the field," commented Lorrie T. Olivier, Chief Executive Officer, "and the necessary curtailment of production coincides well with the expected timing for receipt of relief from the gas flaring restrictions. The government has been helpful and supportive in our efforts to develop the South Alibek field and we have every reason to believe that this goodwill will continue."
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