Gulfsands provided the following update on the Company's operations at Block 26, Syria where Gulfsands holds a 50% interest and acts as operator.
Block 26 Fields Production Performance
Gross oil production from the Khurbet East and Yousefieh fields combined has been increased to approximately 20,000 barrels of oil per day ("bopd") during the month of July. Gross cumulative oil production from the two fields has now passed 9.8 million barrels.
The Khurbet East field continues to sustain production of around 18,000 bopd with minimal decline in reservoir pressure (less than 1%).
Production of oil has been underway at the Yousefieh field since start-up on 24 April 2010 from two vertical wells, Yousefieh-1 and 3. Early production and pressure data from the field indicates that reservoir performance is better than had been expected. During May and June a highly successful acid stimulation program was conducted which succeeded in removing the wellbore formation damage identified as being present in both wells, and which had been limiting production performance. As a result, field production has been increased from an initial 1,200 bopd to a stable rate of 2,000 bopd, and at a higher wellhead flowing pressure. No formation water is being produced.
A third development well, Yousefieh-4H, will be drilled during the third quarter of 2010. This well is planned as a horizontal producer located approximately 500 meters north of the Yousefieh-1 production well. It is anticipated that Yousefieh-4H will increase the field's production capability by an additional 1,000 bopd.
Gross production rates from both fields are now at a level where they are constrained by the logistics of the export trucking arrangement located at the Khurbet East Early Production Facility ("EPF"), which has been in place since the Khurbet East field came on-stream two years ago.
The Company is nearing completion of an 8" export pipeline that is expected to replace the trucking export operation during the third quarter. Once this pipeline is operational and subject to further pending analysis of the throughput capacity of the EPF, consideration will be given to increasing gross production beyond 20,000 bopd.
Khurbet East Field Drilling Results
Horizontal production well Khurbet East 15H ("KHE-15H") targeting the producing Cretaceous Massive formation in the north central crestal area of the Khurbet East field has been successfully drilled, completed and tied-back to the EPF. The well encountered the Massive reservoir approximately 4 meters deeper than prognosed, and a horizontal reservoir section of 210 meters was drilled and completed open hole. KHE-15H is currently producing oil at around 2,500 bopd with no associated production of formation water. Placing the KHE-15 well on production at this rate has enabled off-take from other Khurbet East wells to be reduced as part of the Company's reservoir management strategy directed at optimizing the future recovery of oil.
Vertical delineation well Khurbet East 16 ("KHE-16"), drilled as a north-easterly step out from the central crestal area of the Khurbet East field, was designed to evaluate the potential for an extension of the crestal karstified reservoir along a ridge that has been interpreted to lie to the north-east. The KHE-16 well was drilled 1.5 kilometres to the north-east of discovery well KHE-1 and encountered the Cretaceous Massive formation at 1,970 meters Measured Depth (1,562 meters True Vertical Depth below mean sea level), some 39 meters deeper than the pre-drill prognosis. Approximately 9 meters of high quality karst reservoir was encountered near the top of the reservoir interval.
During production testing operations the KHE-16 well initially flowed clean oil to surface under artificial lift followed by a rapid increase in water-cut to approximately 98% of total fluids produced. The presence of a high quality reservoir in the area was confirmed however, with total fluid production rates in excess of 3,500 barrels of fluid per day achieved on test. Although these results may indicate that the initial oil-in-place within the north-east portion of the field is less than expected, reservoir quality is better than expected due to the presence of the high quality karst reservoir and as evidenced by the attractive total fluid production rates achieved. The well has now been suspended and initially will be used as an observation well for reservoir pressure analysis. Geological and reservoir studies will be conducted over the next several months to assess any impact of the KHE-16 results on the Khurbet East field in-place and recoverable oil volumes.
The Khurbet East 17H ("KHE-17H") horizontal production well targeting the producing Cretaceous Massive formation in the south central crestal area of the field has encountered the reservoir 8 meters deeper than the pre-drill prognosis. A horizontal reservoir section of 86 meters has been drilled and completed open hole, and the well currently awaits tie-back to the EPF where a production test can be conducted. The KHE-17H well will perform a similar role to well KHE-15H, enabling improved reservoir management in order to optimize oil recovery from the Khurbet East field.
Forward Drilling Program
The rig is now being moved to the Yousefieh field area to drill the Yousefieh-4H ("Yous-4H") well as a horizontal development well.
Operations at Yous-4H will be followed by the exploration well Yousefieh South 1 (YSO-1) located approximately 2 km south of the Yousefieh field and targeting a similar objective to the producing reservoir at Yousefieh. The rig will then move back into the Khurbet East field area to drill an additional vertical delineation well, KHE-18. Additional exploration, appraisal and development locations are also currently being assessed.
A new 3D seismic program of 865 square kilometers will be acquired in an area west of the Greater Khurbet East seismic survey, where a number of exploration leads have been identified on vintage 2D seismic data. The survey is scheduled to commence in mid-August, and data acquisition is expected to be completed during the fourth quarter of 2010, with delivery of the processed data in the first quarter of 2011. Once this survey is completed, the Company will have acquired a total of approximately 2,000 square kilometers of contiguous 3D seismic data over the Khurbet East play fairway.
Commenting on this operations update, Ric Malcolm, CEO of Gulfsands, said, "It has been two years since Gulfsands commenced oil production at Khurbet East, and we have now achieved a gross daily average production rate in excess of 20,000 bopd from our two producing fields, with cumulative production of approximately 10 million barrels of oil. These are significant milestones, and are the result of the continued dedication and spirit of cooperation exhibited by our employees and industry partners.
We are pleased with these results, and look forward to continuing our brisk pace of exploration, development and production with our upcoming drilling and 3D seismic acquisition programs."
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