CanArgo Completes Initial Testing on Kumisi #1

CanArgo gave an interim update on testing operations on the Kumisi # 1 well in Georgia announcing that it has concluded initial well testing operations on the Cretaceous interval. To date there have been no indications of flow during the testing, most likely due to the implied low permeability of the Cretaceous reservoir at this location. While these results are being evaluated, further testing will now be done on other shallower potential reservoir units, which appear to be, hydrocarbon bearing from the electric log data. In the WR30 well, approximately 2.5 miles (4 kilometers) down-dip of the Kumisi well, gas was successfully flow tested from Lower Eocene sandstones in 1987.

The Kumisi #1 well reached a total depth of 11,841 feet (3,609 meters) in July 2007 and was drilled to appraise an up-dip extension of a Soviet era gas condensate discovery in Cretaceous age rocks to the south of the city of Tbilisi in Georgia. A total Cretaceous interval of approximately 2,392 feet (729 meters) was penetrated in the well and analysis of the logs indicates the presence of potential hydrocarbons in the well. The Cretaceous is comprised of an upper carbonate sequence, interbedded limestones and tuffs underlain by more massive volcanics. The detailed petrophysical log analysis suggested that the better quality reservoir was confined exclusively to the upper part of the carbonate sequence with limited potential permeability in the deeper volcanic zone. Nevertheless, as a result of the elevated gas readings which were recorded during drilling, and the good flow rates of gas and water obtained from the interval in the original WR16 well, it was decided to test in stages the entire section, to ensure full date collection, despite the fact that the lithology of the volcanic interval appears different to that of the WR16 well.

The well test, which for operational reasons was done from the bottom up, initially focused on the lower potential volcanic rocks with the poorer petrophysical properties. Three separate tests were completed; zone one over the slotted liner section at the base of the well and two additional zones totaling 167 feet (51 meters) were perforated and tested. There was no flow to surface from these tests.

Prior to completing the testing of the carbonate sequence, which was the primary target in the well, operations were suspended for a two-week period while the rig was demobilized and moved to Manavi. Testing resumed at the end of August, with a total of three separate zones in the carbonate section now tested. A total of 180 feet (55 meters) were perforated, including the zone identified by the detailed petrophysical analysis as having potential to flow hydrocarbons, but again with no flow to surface being obtained to date.

A low-pressure hydro squeeze was performed over two separate zones and the data obtained suggests these rocks are tight and lack permeability unlike the rocks encountered in other wells. These results are being incorporated into a technical re-evaluation of the Kumisi prospect in order to better understand the remaining potential of the prospect and it may be that the upper carbonate interval and indeed the underlying rocks have reservoir potential away from the wellbore. This analysis may show that high-pressure acid fracture stimulation may enhance permeability. As no water has been recovered from the well, the potential for a large gas prospect still exists at this up-dip location given better reservoir quality.

Commenting on the testing operations, Vincent McDonnell, President and Chief Executive Officer, said: "The test results for the Cretaceous interval, particularly the carbonate zone, in the Kumisi #1 well have not yet yielded flow but we will be doing further work to evaluate the remaining potential of this large prospect and to decide whether or not acid fracturing stimulation may be effective in this reservoir. In the meantime, we plan to test the shallower Lower Eocene sandstone interval, which appears to be hydrocarbon bearing from the logs. We would hope to have the results of these tests within the next couple of weeks"

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