SYRIA OPERATIONS UPDATE
Average gross field production during the second quarter of 2007 was 2,440 bbls/d (Company net: 1,067 bbls/d). Ten wells were drilled or spudded during the first half of 2007. After drilling key wells at OD 153, OD 155 and OD 158 the drilling focus has been shifted to areas to expand the commercial thermal pilots. The areas for thermal expansion are near OD 146 where steam results were positive and near OD 149 where cold production rates have been steady at 120 bbls/d.
All of the new wells on the western flank of the Oudeh field have confirmed higher viscosity than observed in the eastern areas of the field. This higher oil viscosity, is limiting the cold production rates and it is anticipated that these wells will be highly responsive to thermal stimulation. The company has taken delivery of the first four (of eight total) new generators in Shanghai and the units are currently being shipped from China to Syria. Arrival and installation of the units is expected by the end of August. For the remainder of 2007, Oudeh drilling will focus on production growth in areas where the thermal EOR pilots have had success. Additional drilling rigs and steam generators that are expected to be mobilized during the third quarter will lead to accelerated production growth.
An update of the three key appraisal wells at Oudeh includes:
- OD-155H was drilled to appraise the Shiranish oil potential in the southwest area of the Oudeh field. Production results during the second quarter from this well are excellent with a stabilized average cold production rate of 150 bbls/d. This success will add new reserves and provide another area for additional drilling and production growth during 2007.
- OD-153 was drilled as a deep test targeting the Butmah and Kurrachine Dolomite formations. Petrophysical analysis of OD-153 indicates hydrocarbon pay in the Shiranish, Butmah and Kurrachine Dolomite formations. Production testing for hydrocarbons of the Kurrachine Dolomite has been hampered by zone isolation problems due to poor cement around casing. Remedial options are being considered.
- OD-158H was drilled in May to appraise the Shiranish reservoir in the northwest area of the Oudeh field. Well log results from the vertical pilot bore hole indicate the thickest Shiranish B reservoir interval drilled in the Oudeh field with 112 meters of net oil pay. The horizontal well encountered fractures that are connected to a fresh water aquifer system. Plans are currently in place for remedial cementing of the fractures during the third quarter.
Average gross field production during the second quarter of 2007 was 6,826 bbls/d (Company net: 496 bbls/d). Current gross field production is approximately 7,400 bbls/d. Sixteen wells were drilled during the first half of 2007, including one water disposal well. Drilling activity has increased at the Tishrine West field as a result of two drilling rigs working for most of the first half of 2007. Nine wells were completed as oil producers, one as a gas well and one as a water disposal well. Three wells have only produced water although well log analysis indicates oil pay in the Chilou formation. Another well T-236H that finished drilling at the end of June is waiting for completion. T-234 was drilled as a step-out appraisal well in May and is currently undergoing production testing in the Shiranish formation. The well is located in the southwest area of the Tishrine block two kilometers from the Tishrine West field area. Petrophysical results indicate net oil pay in the Shiranish 92m, Jaddala 206m, Chilou B 40m and Chilou A 21m. Drilling new wells and establishing commercial oil production from these reservoirs around the T-234 well will occur later in 2007.
Tishrine production continued to be constrained during the second quarter of 2007 by insufficient access to workover rigs to perform completions and routine well maintenance. Of the three workover rigs that were expected to be available to the Company in May of 2007, only one was mobilized during the second quarter. Mobilization of the two additional workover rigs was delayed due to logistical issues at the Jordanian border. The two additional rigs are now in Syria and are being commissioned to commence workover activity. The company will continue to take advantage of the workover rigs made available by the Syrian Petroleum Company ("SPC").
Oil production capacity in Tishrine was further constrained during the second quarter of 2007 by water handling capacity. The Company is currently upgrading the water handling system by drilling additional water disposal wells, constructing water handling infrastructure and increasing the water pumping capacity. There are currently four water injection wells in Tishrine injecting water into the Jaddala formation. A fifth water injection well is currently being drilled aiming to inject water into the deeper Soukhne and Ghouna formations. By injecting water into these deeper zones the Company hopes to eliminate injected water being recirculated into the oil producing reservoirs.
The reliability of electrical power supply to Tishrine improved during the second quarter of 2007 with considerable progress made in upgrading the electric infrastructure in the field. It is anticipated that the Tishrine electrical system upgrade will be completed during the fall of 2007.
The steam pilot continued during the second quarter of 2007 at Tishrine, while the Oudeh pilot has been temporarily postponed to install fuel gas processing and hydrogen sulfide removal equipment. Engineering for a gas sweetening plant to be installed at Oudeh has been awarded with the anticipation of a construction and installation tender process to commence in August.
Four of the eight new steam generators have been delivered and are currently being shipped from China to Syria. The generators are expected to be operational by the end of August 2007, bringing the total steam generator count to six.
At Tishrine, the Company has successfully used vacuum insulated tubing to deliver high quality steam in two conventionally competed wells drilled by SPC a number of years ago. Results were positive on both wells with average oil production rates ranging between 150 and 390 bbls/d during the first production cycle. The use of vacuum insulated tubing allows cyclic steam stimulation of pre-existing wells in both fields. Additional quantities of vacuum insulated tubing are being sourced with deliveries expected in the third quarter concurrent with the arrival of the additional steam generators.
EGYPT OPERATIONS UPDATE
Average gross field production during the second quarter of 2007 was 2,902 bbls/d (Company net: 801 bbls/d). Development drilling continued during the first half of the year with three successful oil wells drilled in the West Gharib block. Oil field development permits have been submitted for approval for the East Hoshia and East Arta Fields.
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