UK Oil & Gas PLC has been advised by Aladdin Middle East ("AME"), the operator of the Company's 50% interest in the Resan Licence, that their field crew has discovered a live, light, 41.7°API oil seep in an unused seismic drill-hole (drilled during this year's seismic programme), approximately 4 km north of the recent Basur-3 ("B-3") location.
The seep's API gravity is close to the 43° API gravity of AME's nearby producing East Sadak oil field and provides evidence of an active light oil petroleum system in the central area of the licence, lying to the north of the joint venture's ("JV") focus on appraising the Basur-1 oil discovery. This has positive implications for future exploration in the licence.
The oil was discovered when inspecting unused drilled seismic dynamite shot holes for potential future use. Oil was initially recovered on successive days from a sandstone layer at approximately 4m from surface using a bailer on a cable. Two new drill holes located 8m to the east and west were completed several days later and also recovered light oil to surface from the same depth. Videos of the oil recovery will be placed on the Company's website.
Oil samples have now gone for analysis in T ü rkiye and the UK. The JV is also evaluating the potential acquisition of a new seismic line over the seep to help determine if the oil could be derived from a deeper subsurface oil accumulation.
Drilling and seismic update:
Interpretation of the new 2D seismic programme has now been completed and demonstrates that the Basur closure, within which in 1964 Basur-1 ("B-1") is reported to have recovered 500 barrels of light 35°API oil to surface over a 6-hour period, looks to extend much further to the west than originally mapped, with a possible culmination up to 200m shallower than at B-1. The new seismic also clearly demonstrates the presence of a major backthrust fault to the south of Basur-3 ("B-3"), something not evident on the original legacy seismic. This interpretation helps explain why the reservoir section was not encountered in the B-3 well.
It was always UKOG's view that, due to the uncertainty of fault placements near B-3, if a well were not targeted to directly intersect the reservoir in the vicinity of the B-1 subsurface location, the possibility of coming in lower than prognosis remained a material risk. This is why the Company insisted on a B-3S sidetrack contingency as part of the B-3 operation.
Consideration is, therefore, being given by the JV to the acquisition of a small infill phase 2 seismic programme, designed to define a further Basur drilling location up-dip and to the northwest of B-1 and B-3. This location would be designed to offer the ability to test the Garzan and Mardin reservoirs within the Basur structure via a less complex vertical well, a potentially lower risk lower cost option than the envisaged B-3 sidetrack ("B-3S").
Whilst B-3S still remains a solid and low geological risk option, the new seismic clearly indicates that it would require a longer and higher angle trajectory than previously envisaged, involving drilling through the major backthrust fault at a high angle within potentially heavily fractured limestone rocks. This situation potentially adds to the risks of losing mud circulation and becoming stuck in hole. Whilst this can be mitigated against by detailed operational planning and the correct rig and equipment choices, it could increase the drilling risk, complexity and cost.
Analysis of further geological information obtained from legacy wells in the Resan area indicated that, whilst oil shows were encountered at similar levels to B-1, questions arose as to reservoir quality and the increased chance of fractures acting as conduits for underlying formation water ingress. Consequently, at this time, plans for a vertical Resan-6 ("R-6") well have been put on hold and the partnership will focus on the Basur area, where oil has flowed to surface at reported good rates.
Consequently, the JV will carefully consider its next step in the Resan Licence to ensure it maximises its chances for a successful outcome.
The Company's new depth map plus a pre and post drill seismic line through the B-1 and B-3 location will be made available on its web site.
Stephen Sanderson, UKOG's Chief Executive commented:
"The discovery of the light oil seep is positive and encouraging as it confirms the prospectivity of the central area of the licence to the north of the Basur oil discovery. The new seismic acquisition has also proved its worth in helping to explain the B-3 drilling result and to demonstrate that the B-1 discovery could extend further west and significantly further updip than previously recognised. Careful consideration will now be given to further seismic acquisition combined with plans to drill both B-3S and a new updip B-4 well. "
Qualified Person's Statement
Matt Cartwright, UKOG's Commercial Director, who has 39 years of relevant experience in the global oil industry, has approved the information contained in this announcement. Mr Cartwright is a Chartered Engineer and member of the Society of Petroleum Engineers.