Indus Gas Limited has provided an operations update and a summary of the unaudited combined financial information of its two subsidiary companies, iServices Investment Limited and Newbury Oil Company Limited, together the subsidiaries, for the period ending March 31, 2008 and 2007.
The work undertaken to date fulfils the minimum work obligations required as part of the PSC on the Block.
SGL was declared commercial in January 2008, following an independent assessment of reserves by Industry leading consultants DeGolyer & MacNaughton of Dallas, Texas.
As announced on 6 June 2008, Oil and Natural Gas Corporation of India (ONGC) exercised its option under the PSC to acquire a 30% interest in respect of the SGL Field discovery. Following the exercise of this option, Indus' participating interest in the SGL Field is 63%.
Under the PSC, the ONGC is responsible for its share of the development costs in respect of the SGL Field as well as 100% of the applicable royalty and certain taxes calculated with reference to income from the field as outlined in the admission document. ONGC being a licensee is also obliged to pay the license fees in respect of the Block.
An area of 195 km2 has been proposed as the "SGL Development Area." A field development plan is required to be submitted for this area by January 2009. Upon approval of the plan and the extent of the development, the area approved will be known as the SGL Field and the participants will be able to develop and produce hydrocarbons from this field until the termination of PSC.
The rig used to drill the SSF-2 well, the ZJ40, has now been moved to the SGL field to drill the appraisal/production well OMM-1. A release announcing the spudding of this well will be made shortly.
A term sheet has been signed with GAIL India Limited ("GAIL"), for the supply of 33.5 MMcf of natural gas per day for 12 years. The term sheet is currently being revised to include ONGC as a party to the arrangements. Under the terms of the term sheet, GAIL is required to install a pipeline for the supply of gas to a nearby power plant owned by Rajasthan Regional Vidhyut Utpadan Nigam Limited (RRVUNL). The RRVUNL plant is current producing 110 MW of power, which is being expanded to 270 MW. An initial supply of 7 MMcf of gas will commence within 12 months of the Effective Date of the agreement. The removal of carbon dioxide from the feed gas will not be required for the first 24 months and at which point the supply of gas will increase to 33.5 MMcf per day.
The Company, along with the other SGL field participants, will be required to install appropriate production facilities, including an estimated 16 production wells over the life of the sales contract, a gas gathering station and gas treatment facilities to meet the contractual requirements. Installation of the production facilities is expected to commence from early 2009 following approval of the field development plan.
It is anticipated that a large proportion of the development cost of the SGL field will come from loan financing.
Other Prospects & Discoveries
The SSF-2 discovery well was drilled in February 2008. Wireline logs provide strong evidence of clean, gas charged sand encountered in the Baisakhi and Bedesir sequence. The SSF discovery structure was defined by several 2D seismic lines.
Testing of the likely gas bearing zones has been delayed due to a stuck drill string in the bottom hole. A competitive tender process is currently underway to bring a work over rig onto the Block to conduct the test. The rig is expected on site later this year or early 2009 and following the deployment of certain specialist tools, drill string recovery and testing will continue.
The SPF-1 well, which was drilled to assess the Pariwar -- P10 sequence, was successfully drilled and cased as planned to a total depth of 3,564m in July 2008. Wireline logs indicate the well intersected three gas bearing reservoir intervals in the Early Cretaceous Pariwar formation. During initial testing of these zones, gas and water (interpreted as Formation water) were produced and gas flared continuously for 48 hours. A 6m gas charged interval was intersected at a depth of between 3,267-3,273m, a further 8m interval was encountered between 3,226-3,234m and the final 12m interval at a depth of between 3,208-3,220m.
Further testing, which will require production logging tools, will enable the Company to obtain a better analysis of the gas/water behaviour and obtain pressure and flow rates. Testing is expected to commence later this year, once the tools have arrived and the work-over rig has been mobilized on the well site.
The SPF-1 well was referred to as "SFT-1/P" in the Competent Persons Report and the AIM Admission Document.
SSG -1 Well
The SSG-1 well was successfully drilled to a terminal depth of circa 3,500m as planned. During the drilling operations, several instances of clean gas charged sand horizons were encountered. Testing will commence shortly and an announcement will be made on completion.
The SSG-1 well was spudded on August 22, 2008, targeting the Pariwar formation lead referred to as "SFT-7/L" in the Competent Persons Report and the AIM Admission Document.
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