Dragon Oil Sets Production Target for Cheleken Contract

Dragon Oil announced that on the basis of a comprehensive review of the current performance and production potential of the Cheleken Contract Area that has been carried out in 2011, the Group expects to reach a production target of 100,000 barrels of oil per day ("bopd") in 2015.

We are currently producing approximately 67,000 bopd of crude oil and over 140 MMscfd of gas. With a total of 13 wells expected to be completed this year (ten wells have already been put into production), we anticipate the 2011 exit production to reach approximately 70,000 bopd and the growth of the average daily gross production in 2011 to be above 25%.

Over the 2012-15 period, we expect to be able to maintain an average gross production growth of 10% to 15% per annum, taking our gross field production to a level of 100,000 bopd in 2015, and to sustain this plateau for a minimum period of five years.

Dragon Oil is continuously assessing options to enhance oil recovery from the reservoir, including an on-going evaluation of the merits of a water injection program on the Dzheitune (Lam) field. The results from preliminary injectivity tests are encouraging and the Group intends to implement a pilot water injection project in 2012. The Turkmenistan Government has approved the tendering for equipment for this pilot water injection project, which is the first step before a potential implementation on a wider scale. If successful, there is a possibility to increase further the total recovery of oil from the field and to increase production beyond 100,000 bopd.

Delivery of these production targets, including the attaining of the plateau production level of 100,000 bopd in 2015, is supported by a development plan that envisages deployment of up to three jack-up rigs, additional platform-based rigs, construction of new platforms and execution of a range of key infrastructure projects. We have already contracted the "Caspian Driller", a Super M2 jack-up rig, expected for delivery in Turkmenistan in 1H 2012 and are in the process of tendering for another land rig as well as another Super M2 jack-up rig with mobilization planned in 2012 and 2014, respectively. We have awarded a contract for the construction of the Dzhygalybeg (Zhdanov) B platform and expect to award contracts for the Dzheitune (Lam) D and E platforms in 2012. This continuous infrastructure expansion and rig tendering plans are expected to enable us to complete between 15 and 20 wells a year. The capital spend on infrastructure (excluding gas monetization) over the 2012-15 period is expected to amount to approximately US$1.0bn. The updated field development plans as well as infrastructure and drilling projects are subject to the Turkmenistan Government approvals.

Dr Abdul Jaleel Al Khalifa, Chief Executive Officer, commented, "Dragon Oil, with full support from the Turkmenistan Government, has focused on delivering consistent growth of production in the Cheleken Contract Area. We have a rich reserves and resource base and have accumulated an excellent understanding of the complexities of the reservoir. Future drilling in the Dzhygalybeg (Zhdanov) field and from the Dzheitune (Lam) C and D platforms in the Dzheitune (Lam) West field will further affirm our production growth forecast. The plateau production of 100,000 bopd is a milestone that we aim to achieve in 2015 and maintain for a minimum period of five years. This will represent a significant organic production growth from the Cheleken Contract Area, while any success in the acquisitions arena will offer additional potential for non-organic growth."