The Syrian Ministry of Oil and Mineral Resources and the Syrian Petroleum Company have granted approval for commercial development of the Khurbet East Field.
Field development is intended to commence immediately and establish early production from the shallow Cretaceous Massive reservoir (“Massive Reservoir”) as soon as an Early Production Facility (“EPF”) can be installed at Khurbet East field. An EPF capable of processing some 10,000 barrels per day is expected to be operational by the fourth quarter of 2008 and to be followed by the Full Field Development (“FFD”) facility installation. Engineering and construction of the EPF is scheduled to commence this quarter. Production through the EPF will provide valuable information about reservoir performance that will be used to optimise the design of the FFD facilities.
The Company’s share of costs for the first phase of development, consisting of the construction and installation of the EPF and the drilling of up to three wells, is planned to be met from the Company’s cash flow. The FFD costs, including future development wells within the Massive Reservoir, are anticipated to be met from the cash flows expected to be generated by early production from the field.
The Khurbet East oil field was discovered in the second quarter of 2007 with the Khurbet East No.1 well which recovered an oil sample from the Massive Reservoir. Two appraisal wells have since been drilled and tested, with Khurbet East No.2 flowing 710 barrels of oil per day from a 10 metre section and Khurbet East No.3 flowing 3,420 barrels of oil per day from the full section of the Massive Reservoir.
Reserves
An independent estimate of the petroleum reserves of the Khurbet East field has been completed by RPS Energy Ltd (“RPS”) of London. The standard used by RPS in preparing its estimate was the resource definitions jointly set out by the Society of Petroleum Engineers (SPE), the World Petroleum Congress (WPC), the American Association of Petroleum Geologists (AAPG) and the Society of Petroleum Evaluation Engineers (SPEE) in April 2007 in a document entitled “Petroleum Resources Management System” (PRMS).
The gross life-of-field Proved plus Probable Reserves of oil contained in the Massive Reservoir are estimated to be 65.6 million barrels as at 31 December 2007.
The Company’s has a 50% working interest in the Contractor group. Under the terms of the Contract, the net entitlement Proved plus Probable Reserves of oil attributable to the Company, based on the oil futures price of 4th of January 2008, is 11.3 million barrels after the application of royalties and other terms of the Contract including the apportionment of Cost Recovery Crude Oil and Production Sharing Crude Oil. The Company’s liability for income taxes in Syria, related to the Khurbet East field, is paid on behalf of the Company out of revenue from the Syrian Petroleum Company’s share of oil produced from the field.
Emeralds’ Chief Executive Officer, Angus MacAskill, said:
“We are delighted to receive approval for the commercial development of the Khurbet East field and also with the results of the independent reserves evaluation for the Massive formation. We have been very pleased by the excellent co-operation and support that has been received from both the Syrian Government and Syrian Petroleum Company and we look forward to our future partnership in the joint operating company.”
Emerald holds a 50% interest in Block 26 through its fully owned subsidiary SNG Overseas Ltd.
