Premier Energy Engages in Russian Oil Production
Premier Energy announced its engagement in oil production in Russia through its majority-owned subsidiary Karbon CJSC, which is the holder of the oil and gas exploration and production license for the North-Kopanskoye Oil Field in the Volga-Urals Basin.
The North-Kopanskoye Oil Field covers an approximate area of 3,213 acres and lies about 34 miles southeast of the city of Orenburg and 18 miles south of the Orenburg gas-condensate field. The North-Kopanskoye Oil Field contains two structurally-trapped, carbonate reservoirs, the Pennsylvanian Bashkirian A-4 and Permian Artinsky-1. The Bashkirian A-4 reservoir accumulated oil on two of the four individual domes in the Oil Field. The Artinsky-1 reservoir has a larger accumulation of oil with an associated gas cap, and a separate non-associated gas accumulation.
According to DeGolyer and MacNaughton's appraisal report of 2007, as concluded from the results of over a dozen exploration wells drilled in 1980s, we believe that the North-Kopanskoye Oil Field includes proved oil reserves of about 8 million barrels. The report also indicates additional probable oil reserves of about 21 million barrels (not risk adjusted); however, a new seismic survey and additional drilling are needed to support the probable reserves.
Five of the exploration wells were subsequently completed and produced, but later shut in due to needed work-over. The only presently producing well in the North-Kopanskoye Oilfield is a development well drilled and completed in 2006, with a current production rate of over 60 barrels of oil per day (BOPD).
The present plans for the North-Kopanskoye Oilfield include a routine re-work on two shut-in wells by July and a full work-over on additional two shut-in wells by the end of 2009, with the aim to raise the production rate of the existing wells, as we expect, to 400 BOPD. For further development of the Oil Field and increase in its production rate, the present plans also call for drilling and completion of three new production wells. With necessary contractor agreements already in place, and the existing infrastructure available to accommodate the production increase, the total production rate we expect may reach 1,000 BOPD by the first quarter of 2010. The above plans are subject to obtaining timely the needed funding for the work planned, thus there is no guarantee that we would be able to achieve the production goals within the time frame indicated.