PetroNeft's License 61 Reserves Significantly Increase
PetroNeft has announced a significant increase in Reserves on Licence 61, Tomsk Oblast, Russian Federation, following completion of a Ryder Scott Petroleum Consultants independent reserves audit of the License area.
- 16 % increase in 2P reserves to 70.0 million bbls
- 51% increase in 3P reserves to 530.0 million bbls
Ryder Scott report net reserves under SPE classification of:
- 1P: 10.2 million bbls
- 2P: 70.0 million bbls (P1+P2)
- 3P: 530.0 million bbls (P1+P2+P3)
- Development costs drop by 40%
- Long term test/pilot production continues
Ryder Scott Reserves Report
Following the successful exploration and appraisal program undertaken in License 61 during 2008, PetroNeft's net proved and probable (2P) oil reserves as of January 1, 2008 increased by 16% to 70.0 million barrels of oil ("mmbo"). Proved (1P) oil reserves increased to 10.2 mmbo and proved plus probable plus possible (3P) reserves increased to 530.0 mmbo. A total of 4 oil fields and 24 prospects were included in the report.
PetroNeft's reserves have been revised following the recent independent reserve appraisal conducted by Ryder Scott Petroleum Consultants in accordance with reserve definitions approved by the Society of Petroleum Engineers (SPE) and World Petroleum Congress.
The 2P reserve increase is primarily related to the new field discovery at Kondrashevskoye (formerly Korchegskaya) which has 8.11 million bbls of oil. The oil water contact for this field has yet to be defined and the Company believes the 2P reserves are likely to increase significantly with further delineation. If the oil water contact is defined by the structural spill point, which is the case for the nearby Lineynoye, West Lineynoye and Tungolskoye fields, then the 2P reserves at Kondrashevskoye could approach 20 million bbls.
The significant increase in 3P reserves is based on the detailed reinterpretation of vintage well logs at a number of prospects within Licence Area 61, by Tomsk Geophysical Company (TGK) and also the result from the West-Korchegskaya no. 1 well which encountered a 25 metre sandstone interval, with hydrocarbon potential in the Lower Jurassic section. The log reinterpretation study was undertaken last year following the successful testing of by-passed Cretaceous pay by Imperial Energy at the Kiev-Eganskoye field on adjacent block 80.
TGK is the same petrophysical contractor that identified the by-passed Cretaceous pay at Kiev-Eganskoye and they identify potential by-passed pay in the Cretaceous, Upper Jurassic and Lower to Middle Jurassic intervals in several of the old wells drilled in License 61. Ryder Scott has incorporated the results of this study into their reserve calculation of the Cretaceous and Lower to Middle Jurassic possible reserves which were not previously calculated for License 61.
The Russian Registered (GKZ) reserves for License 61 were updated in December and the C1+C2 booked reserves now equal 95 million bbls. These reserves are not calculated on exactly the same criteria as the SPE reserves, but there should be general alignment between the C1+C2 and 2P numbers.
Update on Financing Activities
The Company is continuing discussions with financial institutions with regard to the funding for the development of the Lineynoye and West Lineynoye oil fields. The Company acquired the pipe required for the 62 km pipeline in 2008 and this pipe is in secure storage.
The movement in the price of oil over the last number of months had an impact on the financing of the project. However the recent depreciation of the Russian Rouble and a softening of actual Rouble prices for goods and services in Russia mean that the dollar cost of the project has fallen by about 40% since summer 2008. Consequently the Company's dollar funding requirement for the development of the Lineynoye oil fields is significantly lower than previous estimates.
Update on Production Testing
The long term test/pilot production of the Lineynoye No. 1, No. 6 and No. 7 wells is progressing as planned. All wells are currently flowing and the testing will continue as long as winter roads are in place to truck the oil to market. In addition to generating a modest profit over the period, the production data will assist in planning the optimal well fracture programme to stimulate production and enhance long-term reserve recovery from the fields, which should also help to firm up project economic estimates and to secure project financing at the earliest date possible.
Dennis Francis, Chief Executive Officer of PetroNeft commented, "This reserves increase shows continuing progress in our understanding and appraisal of License 61.
"PetroNeft has not only proved a significant reserve base for development, but has also built up a high quality inventory of prospects which offer upside through exploration over the medium and long term. The addition of quality Cretaceous and Lower to Middle Jurassic prospects this past year significantly enhances the upside potential of the License area.
"We will continue to maintain our focus on optimising and accomplishing the development of the Lineynoye and West Lineynoye fields as soon as practical in today's economic climate, whilst continuing to consider ways to accelerate the evaluation of the numerous remaining prospects on License 61 and to consider acquisitions or other opportunities which will enhance the value of the Company."
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