Imperial Energy Finds More Oil in Western Siberia

Imperial Energy has made a new significant discovery of oil at Snezhnaya, Block 77, Tomsk, Western Siberia.

Key points:

  • Oil discovered in Lower Cretaceous section in the Snezhnaya field, Block 77
  • Initial test data indicates potential for good commercial production
  • Following on from Imperial's recent Lower Cretaceous oil discovery in Block 69 this confirms the potential for further significant discoveries in this formation on other blocks
  • Plans now being made to address this horizon for production in parallel with the already producing Jurassic section.
  • As a result of better than expected flow rates the early production from the seven wells in Block 77, excluding this new discovery, is now expected to exceed Imperial's initial production target of 1500 – 2000 bopd by end of May 2006 with production expected to reach 2,000 bopd in June rising to 2,500 bopd in July, a 25% uplift from the top of the range of the target level previously announced
  • The Group remains on track to achieve its production target of 25,000 bopd by 2008

The new discovery of oil is from the Lower Cretaceous section in the Snezhnaya 139 well on Block 77. This well is a Jurassic appraisal/production well on the Snezhnaya Field drilled earlier this year. The Jurassic section was successfully fracced in April 2006 in preparation for bringing it into production.

This test was designed to confirm the presence of commercially producible oil from the Lower Cretaceous but was restricted in scope so as not to jeopardize further production from the underlying Jurassic in this well. From a test interval of only 2m at a depth of 2713m to 2715m the well flowed good quality light oil of 41 degrees API to surface with no water and very little gas. Whilst with such little gas, unassisted flow rates are inevitably low, the production rate on pump can be expected to be much greater. It is estimated that production from the 5m of net pay in this well with stimulation and pumping could achieve rates in excess of 500 bopd. The same reservoir interval is also interpreted from logs to be present, with potentially greater net pay, in wells 135 and 137 and the old well 134 drilled in Soviet times, confirming the significant extent of this new reservoir interval on the Snezhnaya Field. Production from this reservoir has not previously been included in Imperial's production targets, but plans are being made to bring this reservoir into production in 2007 in addition to the core productive zone of the Jurassic. This discovery will have a positive impact on Imperial's reported 2P reserves, though at this stage no volumetric assessment of the size of the potential reservoir has been undertaken.

This discovery of oil in the Lower Cretaceous at Snezhnaya confirms Imperial's view, given at the time of the Aikagalskaya Block 69 Lower Cretaceous discovery in January 2006, that there is significant potential for further discoveries from this horizon throughout Imperial's Tomsk acreage. This is demonstrated by the fact that the Snezhnaya and Aikagalskaya fields are some 180 kms apart. Accordingly the section will be addressed where appropriate in Imperial's extensive exploration drilling program of 12 wells during 2006 and 2007. This reservoir is generally more productive than the underlying Jurassic one. Higher production rates and consequently improved economics can be expected. Furthermore the Lower Cretaceous section often has multiple pay zones in stacked reservoirs, which further enhances potential productivity.

Results, materially ahead of expectations, are also being achieved from the testing of the Jurassic section production wells at Snezhnaya. Imperial is now anticipating production of some 2,000 bopd in June from six wells and rising to in excess of 2,500 bopd when Snezhnaya 137 is brought into production in July. Such production will thus substantially exceed the initial target for early production of 1500-2000 bopd.

Peter Levine, Chairman and Chief Executive commented:

"The latest discovery clearly demonstrates the significant potential of this horizon throughout our large acreage in the Tomsk region.

"The expected increased flow rates in Snezhnaya currently can be expected to materially enhance the economics of this already producing field.

"Progress on the other parts of Imperial's drilling program is continuing well and further announcements as appropriate can be expected through the second half of the year."