Gulfsands Petroleum plc, the oil and gas production, exploration and development company with activities in Syria, Iraq, Tunisia, Italy and the U.S.A., is pleased to provide the following update on the Company's operations at Block 26, Syria, where Gulfsands holds a 50% interest and acts as operator.
Central Processing Facility Tender Selection and Project Update
Following a lengthy and detailed tender selection process carried out in close cooperation with the General Petroleum Corporation of Syria (GPC) the Company is pleased to confirm that Saipem S.p.A. (Saipem), an internationally recognized leader in oil field engineering and construction has been selected as the successful tenderer for the construction of the Central Processing Facility (CPF) to be installed at the Khurbet East oil field on Block 26, Syria.
The CPF has been designed with an initial capacity to handle the processing of 50,000 barrels of fluid per day (bofd) of which it is expected initial oil production will be 33,000 barrels of oil per day (bopd). The contract for construction of the CPF is expected to be signed later this month and provides for delivery of the completed project within 20 months of signing, with completion now anticipated for September 2012.
The contract tender price of Euro 94 million (US$ 129 million) represents a modest increase in the Company's original estimate for construction of the CPF reflecting changes to the engineering design to facilitate ready expansion of the plant's capacity and movement in the Euro/US$ exchange rates since original estimates were prepared. The estimated cost to Gulfsands after cost recovery is approximately Euro 16 million (US$ 22 million).
3D Seismic Acquisition Programme
The 2010 3D seismic acquisition programme, consisting of approximately 1,025 km2 of new 3D seismic data directly west of the Greater Khurbet East area, is approximately 80% complete. The programme remains on track to be completed during the fourth quarter of this year, with delivery of the final processed data during the first quarter of 2011.
Zahraa-1 Exploration Well
Drilling continues with the Crosco 501 drilling rig on the Zahraa-1 (ZAH-1) exploration well, which was spudded on 21 October. The Zahraa prospect is located in the far northeast portion of the Block, near the intersection of Syria's borders with Iraq and Turkey. The well will evaluate a structure that is similar, on trend and adjacent to the producing Karatchok oil field. It is planned to drill to a total measured depth of 2,600 metres.
The gross mean unrisked resource for this well is estimated as 30 million barrels of oil recoverable. The Zahraa-1 exploration well will be drilled on a "sole risk" basis (100% Gulfsands working interest) and drilling operations are expected to take approximately 60 days to complete.
Twaiba-1 Exploration Well
Following the completion of operations on the KHE-18 well, the Crosco 401 rig moved to the Twaiba-1 exploration well location, approximately 7 kilometers north northeast of the KHE-1 discovery well. However during rigging operations the mast of the Crosco 401 rig sustained damage resulting in the suspension of rigging operations pending the arrival of replacement equipment. It is presently uncertain when rigging operations will recommence but Crosco has confirmed it is moving swiftly to locate and deliver the required replacement equipment and in the meantime rig usage charges have been suspended. All repair costs are to Crosco's account. A further announcement on the spudding of the Twaiba-1 well will be made in due course.
The Twaiba-1 prospect is estimated as 5 million barrels of oil recoverable. The Twaiba-1 exploration well will be drilled on a "sole risk" basis (100% Gulfsands working interest) and drilling operations are expected to take approximately 30 days to complete.
Khurbet East and Yousefieh Production
Gross production from the Khurbet East and Yousefieh fields continues at a combined production rate of approximately 21,000 bopd with both fields continuing to produce oil with negligible associated volumes of formation water. Gross cumulative oil production from both fields has now exceeded 12 million barrels.
Commenting on this operations update, Ric Malcolm, CEO of Gulfsands said:
"We are delighted to have a company of Saipem's reputation and capability building the Central Production Facility and look forward to increasing gross oil production in the fourth quarter of 2012 to 33,000 barrels of oil per day."