Block 32, Yemen (13.81087% working interest): The Tasour #18 development well was drilled to a total depth of 2,103 meters and completed as a producing Qishn oil well. The well encountered three upper Qishn sands (S1-A, S1-B and S1-C) in a structurally high position above the original field oil water contact. The well has been initially completed and placed on production as a Qishn S-1C oil producer with an initial production rate of 3,000 Bpd (410 Bpd to TransGlobe) of oil and 1,550 Bpd of water. The remaining zones (S-1B and the main Tasour field S1-A) will be completed in the future, to optimize field production and recoveries. The drilling rig is scheduled to move to a non-owned adjacent block for a two to three well program before returning to Block 32 for additional drilling in the 4th quarter of 2005.
A second drilling rig commenced drilling Tasour #19 on June 8 and is currently drilling. Tasour #19 will appraise the central southwest portion of the Tasour field and evaluate a potential Basement exploration prospect located south of the main Tasour field. The Basement prospect was identified on the 3-D seismic shot over the Tasour field in 2004 and is analogous to recent Basement oil discoveries in the Masila basin (Canadian Nexen's Block 14, Total's Block 10 and recently DNO's Block 43). It is expected that Tasour #19 will be drilled and evaluated by the end of July. The Tasour field is currently producing 16,350 Bopd (2,260 Bopd to TransGlobe) with the addition of Tasour #18.
Block 72, Yemen (33% working interest): DNO ASA (operator at 34%), TG Holdings Yemen Inc. (33%) and Ansan Wikfs (Hadramaut) Limited (33%) ("Block 72 Joint Venture Group") were selected as the successful bidders for Block 72 in the Yemen International Bid Round for Exploration and Production of Hydrocarbons. TG Holdings Yemen Inc. is a wholly owned subsidiary of TransGlobe Energy Corporation. The Block 72 Production Sharing Agreement ("PSA") was ratified by the Yemen parliament on June 18, 2005. The PSA will become law, following the Presidential decree which is expected with in the next two weeks.
Block 72 encompasses 1,822 square kilometers (approximately 450,234 acres) and is located in the western Masila Basin adjacent to the billion barrel Canadian Nexen Masila Block. The Block 72 Joint Venture Group plans to carry out a seismic acquisition program and the drilling of two exploration wells during the first exploration period of thirty months. An initial seismic program will be acquired during late 2005/early 2006, with drilling commencing in 2006. Any discoveries made on Block 72 would follow a similar development program to Block 32's whereby a separate oil processing facility and a pipeline would be constructed to connect to the Nexen export pipeline.
Block S-1, Yemen (25% working interest): The exploration well, Wadi Markhah #1, which commenced drilling on April 26, 2005, was drilled to a total depth of 2,404 meters. The well was cased to evaluate hydrocarbon shows in the Azal, Lam, Shuqra and Kohlan/Basement formations. The Kohlan/Basement was perforated, acidized and recovered 5 barrels of light 34 API oil on a short swab test. Following the Kohlan/Basement test, the Shuqra formation was perforated and acidized. A total of 58 barrels of 36 API light oil was recovered on swab test, however the estimated inflow potential of 2 to 3 barrels/hour (approximately 50 to 70 Bopd) was determined to be non-commercial in the Wadi Markhah #1 well.
The Operator of the well has proposed an exploratory side track of the well to evaluate the upper Lam potential on the flank of the Markhah structure. The Lam formation encountered in Wadi Markhah #1 was a poorly developed sand which had light oil (39 API) recovered in core samples (similar to the An Nagyah #1 well). The lower portion of the well has been plugged and abandoned. The exploratory side track will be kicked off below the Azal formation. It is expected that the exploratory side track will take two to three weeks to drill and evaluate. The light 38 API oil and gas shows observed in the upper Azal formation can be tested after the side track has been drilled and evaluated. Following Wadi Markhah #1 ST (side track), the drilling rig will move to the An Nagyah field to drill a development horizontal well at An Nagyah #16.
The current production from Block S-1 of approximately 8,300 Bopd (2,075 Bopd to TransGlobe) is limited by trucking and gas re-injection capacity. The pipeline and pumping facilities are nearing completion and expected to be operational by the first week of July 2005. The An Nagyah field production should exceed 10,000 Bopd (2,500 Bopd to TransGlobe) when the pipeline and facilities are operational. It is expected that current per barrel operating costs will be reduced by $1.50 to $2.00 per barrel when the pipeline is operational and production is increased to the 10,000+ Bopd level.