Syria: Khurbet East Oil Field Production exceeds 11,500 barrels per day
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, and the U.S.A., announced that stabilized oil production through the Khurbet East Early Production Facility (“EPF”) now exceeds 11,500 barrels of 25.7 degree API oil per day (bopd), with production from three vertical and two horizontal wells.
Oil production through the Khurbet East EPF commenced on 21st July 2008 with initial production from the KHE-4 vertical well. Additional wells were successively brought online, and daily average production through the month of August was approximately 5600 bopd. Upon completion of the production startup phase on 5th September, all five wells are online and daily production was increased to in excess of 11,500 bopd with only trace amounts of water.
Total field production to date has been in excess of 260,000 barrels of oil with the oil being transported by truck approximately 33 kilometers from the EPF to a processing facility operated by the Syrian Petroleum Company (“SPC”). Sufficient trucking capacity had been pre-arranged in order to transport these daily volumes.
The production startup phase included a pressure monitoring programme designed to obtain data to be used to improve reservoir and field performance. Surface and down-hole pressure gauges were installed in all wells. Individual wells were shut-in for pre-planned periods to monitor reservoir pressure behavior.
On 5th September, the Company completed the initial data gathering phase and the down-hole memory gauges were pulled from the wells. The data are currently being analysed by in-house and external engineering professionals. The results of these analyses, combined with real-time production information, will be used for reservoir management as well as full-field development planning and design purposes.
Under oil marketing arrangements reached with SPC and the Oil Marketing Bureau (“OMB”) of the Syrian Government, oil produced from the Khurbet East Field will be sold as “Syrian heavy crude oil” which has an API of approximately 24.1, into the OMB’s well established markets and exported through the Mediterranean port of Tartous using SPC’s oil handling infrastructure. Monthly invoices will be raised for oil produced from the field and these will generally be paid by the OMB within 21 days of the date of invoice based upon the initially assessed technical specification of the oil.
However during the first 12 months of production and in keeping with the oil marketing arrangements for oil produced from newly developed fields and other producing fields within the region using the same SPC oil handling infrastructure, the OMB has agreed to make an initial payment equal to 80% of the value of the invoiced deliveries which value will be calculated by reference to the official price of “Syrian heavy crude oil” with the balance 20% of the invoiced amount being retained pending completion of an independent analysis of the specification of the oil delivered during this period. This independent analysis will be carried out in September 2009 at which time and subject to such adjustments as may be required for variations in oil quality, the OMB will then pay all outstanding invoice retentions. After completion of this oil analysis process, OMB will then begin paying for 100% of all monthly invoiced deliveries within 21 days of receiving month end invoices.
Andrew West, Chairman of Gulfsands said: “Khurbet East is the first new oil field to go into commercial production in Syria in some time and we are therefore very pleased with the initial results so far. It is especially pleasing that the individual producing wells, production facility and trucking operations are producing at even better rates than we expected prior to our commencement of first oil in mid July. With total field production to date now in excess of 260,000 barrels of oil, we have achieved another significant milestone for the Company and we look forward to the Khurbet East Field’s continued contribution to our production profile and cash flow.”