Gulf Keystone Mulls Possible Farm-Out of Shaikan Block Interest

Gulf Keystone Petroleum has provided an update with respect to its activities in the Kurdistan region of Iraq by its wholly owned subsidiary, Gulf Keystone Petroleum International Limited ('GKPIL').

The highly prospective Shaikan Block is situated near the city of Dihok, approximately 85 kilometers northwest of Erbil and covers an area of 283 square kilometers. Shaikan has recently been covered by 171 km of 2D seismic and analysis of that seismic data has already resulted in a first, ready to drill, prospect. Based on this seismic data and analogues in the region, and should a discovery well be drilled, potential un-risked in place contingent volumes in this prospect are up to 2 billion reservoir barrels of oil as estimated by the Gulf Keystone technical team.

A drilling rig has been contracted with Weatherford Drilling International (BVI) Ltd. The new build NOV IDEAL 1500HP rig is expected to arrive in country before the end of this year with a target date for the commencement of drilling in early 2009.

The acquisition of a well head and casing is at an advanced stage with most long lead items either in stock at our pipe yard near Maraiba in Kurdistan or in transit to Kurdistan. In addition preparation of the Shaikan-1 drilling site is well underway. Tenders for ancillary well site services are either being solicited or are under evaluation.

GKPIL, as part of its established portfolio management strategy, is reviewing a number of options including a possible farm-out of some of its 75% interest in the Shaikan Block.

The Akri-Bijeel Block is adjacent to the Shaikan Block and covers an area of 889 square kilometers. Acquisition of 442 kilometers of 2D seismic was completed in August and processing of the seismic data is underway. It is intended to drill the first Akri-Bijeel well following completion of Shaikan-1 using the same rig.

Todd Kozel, Executive Chairman & Chief Executive Officer of Gulf Keystone said,"We and our partners continue to make rapid progress on both Kurdistan blocks. In particular, preparations for spudding the first well on Shaikan are advanced and we are eagerly awaiting arrival of the rig. Given the widely acknowledged prospectivity of Shaikan and the good seismic indications, we are looking forward to the first well with mounting excitement.

"The potential farm-out of some of GKP's interest in the Shaikan Block is prudent risk mitigation given our high percentage holding of 75% in this exciting exploration play. Farm-outs are also an important tool in managing internal cash generation and future capital commitments, as such Gulf Keystone will continue to assess its wider portfolio, strategy and opportunities in these dynamic times."