CanArgo Issues Update on Georgia, Kazakhstan Ops

CanArgo Energy Corporation on Monday provided an update on its operations activities in Georgia and Kazakhstan.

At Manavi, initial testing operations on the Manavi M12 appraisal well have commenced. A 5" pre-perforated production liner was run and a production testing string set to test the Cretaceous carbonate and interbedded units. During setting of the test string, the well began flowing and it was necessary to increase the mud weight to control the well whilst the test string was set. Following this, extreme cold weather was primarily responsible for delays in the testing process but testing has now commenced. Despite the flow and gas observed at surface during drilling operations, the initial testing operations resulted in a pressure increase at surface but with no discernable flow. Subsequent re-perforating of parts of the test interval has resulted in minor flow and some gas to surface. However it is considered likely that formation damage has occurred, probably whilst controlling the well during the setting of the test string, with mud penetrating and blocking the formation. Therefore stimulation techniques will be required to fully production test the potential of the well.

The Saipem drilling rig is now being demobilized from the site and following this it is initially planned to carry out an acid stimulation of the reservoir, a technique frequently used in similar carbonate reservoirs, and indeed commonly used in Cretaceous fields in the North Caucasus. For example in Dagestan, southern Russia, where prolific Cretaceous carbonate fields are being developed, wells can require several acid treatments to realize their full flow potential according to Dagestani specialists working on these fields. If necessary, it would be planned to follow this with a hydraulic fracturing program in order to fully eliminate the potential formation damage. De-mobilization of the Saipem rig from the site will take approximately one month, prior to commencement of the acid stimulation, which will utilize locally available equipment. If the contingent hydraulic fracturing program is deemed to be required, it will be necessary to bring in specialist equipment to Georgia, and the Company is currently ascertaining the availability of such equipment.

At Kumisi, CanArgo Rig #2 is now mobilized to the site of the Kumisi #1 well, the appraisal well to the West Rustavi #16 Cretaceous gas condensate discovery made in Soviet times. Seismic data shot by CanArgo indicates a potentially large structure may be present and test data from the discovery well indicates that reservoir productivity should be good. This structure is situated just to the south of the capital city, Tbilisi, close to the Rustavi industrial complex, Gardabani thermal power plant and the route of the new South Caucasus gas trunkline. The well should spud before the end of this month, once the necessary drilling permit has been obtained from the competent body, this having been delayed due to a restructuring of responsibilities for oil and gas within the Georgian government.

In Kazakhstan, the AKK06 (Central Akkulka) exploration well has reached TD at 1,876 feet (572 meters). Wireline logs have been run, these showing indications of gas bearing sandstones inline with expectations. Production casing is now being run in preparation for an integrated testing program expected to commence on this and other nearby wells next month. The AKK06 well is the first of the current planned program of five shallow gas exploration wells to be drilled in the Akkulka area over the next few months, and is located down-dip and to the south-west of the AKK04 Central Akkulka discovery well which flowed dry gas at rates up to 8.8 million cubic feet (250,000 cubic meters) per day. Meanwhile construction work has commenced on the pipeline tie-in for the Kyzyloi field development, with first gas planned for the spring of this year.

CanArgo is an independent oil and gas exploration and production company with its oil and gas operations currently located in Georgia and in the Republic of Kazakhstan.