Arawak's Production Output Rises in Kazakhstan Fields

Arawak Energy's net production has risen to approximately 12,750 barrels of oil per day ("bopd") following a rise in produced volumes at the Akzhar and Besbolek fields in Kazakhstan.

Production at the Company's two main producing assets in Kazakhstan had been constrained in previous months while we sought regulatory approval for the transition of the contracts from the exploration phase to the production stage.

Arawak announced on September 25, 2008 that the government regulatory authority in Kazakhstan, the Central Committee for Development, had approved the technical plans of development for both fields, allowing us to immediately begin work on the development phases.

The Company embarked on a re-entry program to rejuvenate shut-in production, which has already resulted in an increase in flow rates at both Akzhar and Besbolek. Concurrently, four rigs were mobilized to pursue an
aggressive ten-well development drilling program at each field for the remainder of the year. All four rigs have already commenced drilling at Akzhar and Besbolek.

Alastair McBain, Arawak's President and Chief Executive Officer, commented, "In just a few weeks after receiving the approvals we have seen an improvement in our production rates and we expect this to continue at a steady pace until the end of the year. The speed at which we were able to mobilize the drilling rigs and the rig crews is a testament to the planning, preparation and execution skills of our staff in Kazakhstan."


The Company has been successful in its application for the cancellation of the export customs duty applied to its Akzhar contract and we are currently awaiting confirmation on the amounts and process of reimbursement. Exports from the Besbolek field will continue to be subject to export customs duty. As announced by the government of Kazakstan in September, the export customs duty increased to $203.8 per tonne from $109.9 per tonne effective October 11. Besbolek accounts for 23% of Arawak's current net production in Kazakhstan.
In other operations, production at the 40% owned Saigak field was steady at 1,180 bopd net to Arawak.

In the East Zharkamys III exploration block, the Utubai 1 well encountered 40 meters of prospective gas pay in the Barremian formation at a depth of 342 meters. Casing has been set for future resource testing. Two
wells drilled earlier this year were plugged and abandoned with no significant hydrocarbons detected. In total, five wells are scheduled for drilling on the East Zharkamys III block in 2008 as required under the work commitment program prior to our plans to acquire seismic data. A seismic crew has now been mobilized to the area and has commenced pilot testing for a 530 km 2D seismic programme scheduled in the second half of October.

At the recently acquired Tamdykol exploration block, the Company is finalizing the program for a 220 km 2D seismic survey in the fourth quarter. At the Alimbai producing block, processing of the seismic data from the
27 sq km 3D and 200 km 2D program undertaken in the second quarter is scheduled to be completed by the end of October.


In the North Irael block, offset well 641, which commenced drilling in the second quarter, encountered oil at a deeper horizon than previously discovered. This has confirmed a lower oil/water contact and is therefore
expected to add additional reserves to the field as well as proving up oil in the expected productive horizon. The well, which is offset to exploration well 64, is producing approximately 250 bopd of natural flow from the new horizon.

Presently we are drilling well 642, the second delineation test in the pool. In the Sotchemyu-Talyu area, drilling is continuing at the 128 development well, which tested oil on drill stem test in the upper F2 interval, a shallow Devonian horizon above the original target Fo interval.

The Company has drilled and completed eight wells in Sotchemyu-Talyu so far in 2008 with seven considered commercial successes and one awaiting workover activities. Work is expected to start in the fourth quarter on an inter-field pipeline to tie North Irael production into the central processing facilities at Sotchemyu-Talyu.

At the Company's two other contract areas in Russia, a seismic crew has been mobilized to the South Sotchemyu appraisal block in preparation for a 115 km 2D seismic acquisition program in the fourth quarter. A 40 sq km 3D seismic program was completed at South Sotchemyu earlier this year. In addition, a 100 km 2D survey is scheduled in the coming winter months at the Kymbozhyuskaya exploration block ahead of drilling of exploration well 11 in February 2009.