Syria Operations Update

RNS Number : 1431W

Gulfsands Petroleum PLC

15 November 2010

 



Immediate Release	15th November, 2010

GULFSANDS PETROLEUM PLC

Syria Operations Update

London, 15^th November, 2010:  Gulfsands Petroleum plc ("Gulfsands", the "Group" or the "Company" - AIM: GPX), 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 kilometres 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."

This release has been approved by Richard Malcolm, Chief Executive of Gulfsands Petroleum Plc who has a Bachelor of Science degree in Geology with 30 years of experience in petroleum exploration and management. Mr. Malcolm has consented to the inclusion of the technical information in this release in the form and context in which it appears.

For more information please contact:

Gulfsands Petroleum (London)                                                                          [phone]

Richard Malcolm, Chief Executive Officer

Andrew Rose, Chief Financial Officer

Kenneth Judge, Director: Corporate Development & Communications  

Buchanan Communications Limited (London)                                                     [phone]

Bobby Morse

Ben Romney

Chris McMahon          

RBC Capital Markets (London)                                                                          [phone]

Josh Critchley

Matthew Coakes

Martin Eales    

ABOUT GULFSANDS:

Gulfsands is listed on the AIM market of the London Stock Exchange.

Syria

Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria.  The Khurbet East oil field was discovered in June 2007 and commenced commercial production within 13 months of the discovery. This field is producing at an average gross production rate of approximately 18,000 barrels of oil per day through an early production facility. A second field discovery, the Yousefieh field, was brought on-stream in April 2010, and is currently producing approximately 3,000 barrels of oil per day. Block 26 covers approximately 5,414 km² and encompasses existing fields which currently produce over 100,000 barrels of oil per day, and are operated mainly by the Syrian Petroleum Company.  The current exploration license expires in August 2012. Gulfsands' working interest 2P reserves in Syria at 31 December 2009 were 46.0 mmbbls.

Tunisia

Gulfsands is acquiring working interest positions in two exploration permits in Tunisia (Chorbane and Kerkouane Permits) and one exploration permit in Southern Italy (G.R15.PU) from ADX Energy Ltd the operator of all three permits. The Company's interest in these permits remains subject to the completion of the Company's farm obligations and various approvals from the governments of Tunisia and Italy.

Kerkouane Permit - Offshore Tunisia

G.R15.PU Permit (Pantelleria Permit) - Offshore Italy

G.R15.PU, is located offshore the island of Pantelleria southwest of Sicily in Italian waters and the Kerkouane Permit is located offshore northeast Tunisia. The two permits are contiguous and comprise a total area of approximately 4,500 km².

The operator has identified multiple leads and targets on these permits. Drilling operations were recently completed at the Lambouka-1 well where gas was encountered in the Abiod Formation. However, as a result of down-hole problems, no fluid samples or gas flow were established. The well was suspended with the intention of re-entering at a later date and drilling and testing the reservoir in a sidetrack hole up-dip of the existing discovery. 

Gulfsands has completed its earn commitments with respect to the Kerkouane and Pantelleria Permits with the drilling of the Lambouka-1 well. Gulfsands has earned a 30% working interest in both permits by paying approximately 35% of the cost the Lambouka-1 well and reimbursing the operator for a portion of various pre-drill costs that include a recently completed 3D seismic programme.

Chorbane Permit - Onshore Tunisia

The Chorbane permit is located in central Tunisia and covers an area of 2,428 km². The permit is surrounded by several producing oil fields and extensive oil & gas infrastructure. Gulfsands' forward work commitment for the Chorbane permit includes the drilling of one exploration well in the fourth quarter of 2010 for which Gulfsands will pay 80% of the estimate US$6 million cost of the first exploration well so as to earn a 40% interest in the permit. 

A number of prospects and leads have been indentified within the permit, the most prospective being a large tilted horst block ("Sidi Daher") where the operator has identified multiple potential targets estimated to hold recoverable un-risked prospective resources of 60 mmboe. 

Iraq

Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministry of Oil in Iraq for the Maysan Gas Project in Southern Iraq, following completion of a feasibility study on the project, and is negotiating details of a definitive contract for this regionally important development.  The project will gather, process and transmit natural gas that is currently a waste by-product of oil production and as a result of the present practice of gas flaring, contributes to significant environmental damage in the region. The Company is actively engaged in discussions with respect to financing and potential equity partners.  Gulfsands has no reserves in Iraq.

Gulf of Mexico, USA

The Company owns interests in 37 leases offshore Texas and Louisiana, which include 24 producing oil and gas fields with proved and probable working interest reserves at 31 December 2009 of 4.7 mmboe.

Certain statements included herein constitute "forward-looking statements" within the meaning of applicable securities legislation. These forward-looking statements are based on certain assumptions made by Gulfsands and as such are not a guarantee of future performance. Actual results could differ materially from those expressed or implied in such forward-looking statements due to factors such as general economic and market conditions, increased costs of production or a decline in oil and gas prices. Gulfsands is under no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.

More information can be found on the Company's website www.gulfsands.com

 

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