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Gulf Keystone Petroleum reveals very promising initial results from Shaikan-4 well

Last updated: 06:15 13 Dec 2011 GMT, First published: 07:15 13 Dec 2011 GMT

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Gulf Keystone Petroleum (LON:GKP) chief operating officer John Gerstenlauer has described as “very promising” initial results from the company’s fourth well on the Shaikan field in Kurdistan.

Having been drilled to a total depth of 3,387 metres it has uncovered what potentially are two new, deeper lying reservoirs in the Sargelu sands and Barsarin carbonates. 

Gulf Keystone is now carrying out a testing programme of Shaikan-4, which is six kilometers west of the company’s initial well.

The company also revealed this morning it is restarting sales into the local market at the rate of 1,500 to 2,000 barrels a day.

Gerstenlauer said:"Following our recently completed tests at the Shaikan-2 appraisal well, we plan to replicate this successful programme at Shaikan-4. 

"Our preliminary results for this well are very promising and we look forward to the Shaikan-4 well testing programme which is yet another step in the process of unlocking the full potential of the giant Shaikan discovery in the Kurdistan Region of Iraq. 

“In this regard, the recommencement of our domestic oil sales is particularly significant as we prepare to upgrade the existing test production facilities and ramp up both domestic sales and oil exports of the Shaikan crude in the first half of 2012."  

In a wide-ranging update, the group said the first well on the Ber Behr field is now at a 1,765 metres and is headed for a depth of around 2,100 metres.

Shaikan-5, meanwhile, is at 856 metres and the rig is on site at Shaikan-6, which will spud later this month. 

Finally, testing on Bekhme-1, the second exploration well on the Akri-Bijeel block drilled 20 km to the north-east from the Bijell 1 discovery well, is ongoing, GKP said.

Last month the explorer unveiled a significant upgrade to the oil in place volumes for the Shaikan block in Northern Iraq.

An independent review by Dynamic Global Advisors estimated the Kurdistan field contains 8 billion barrels of crude calculated on a P90 basis – meaning the oil has a 90 per cent certainty of being produced. The figure rose from 4.9 billion barrels previously.

Following the analysis carried out by Houston-based DGA, the P10 value increased to 13.4 billion barrels and the mean value to 10.5 billion barrels.  

This was the second very significant upgrade to the Shaikan resource estimate this year and the third since 2009. 

It is based on preliminary data acquired from Shaikan-4 and 3D seismic taken from the Shaikan and Sheikh Adi blocks. 

DGA also included the new Triassic discovery made with the Shaikan-2 appraisal well. 

The current exploration programme will see the company broaden and deepen the search for oil. 

Shaikan-5 and Shaikan-6 are expected to provide us with valuable information about the flanks of the massive Shaikan structure, while the Shaikan-7 well will target the Permian - the deepest undrilled horizon of the structure. 

The Shaikan appraisal programme is being completed in parallel with the ongoing work on the Shaikan field development plan.

Shaikan is the company’s most advanced prospect and has the potential to be the world’s next super-giant oil find. The company currently holds a 75 per cent interest.

According to analysts the nearby Ber Bahr field could be even bigger. 

It is operated by Turkish outfit Genel Energy, which has a 40 per cent interest, as has Gulf Keystone. The remainder is owned by the Kurdistan Regional Government.

Gulf Keystone has a 20 percent working interest in the Akri-Bijeel, which is operated by of MOL Group, which holds an 80 percent working interest in the block.

And it recently announced plans to sell its interest in this field to concentrate on other prospects.

Gulf Keystone has made remarkable progress in the last 18 months with a high impact drilling programme that wouldn’t look out of place at one of the larger independents.

A recent US$200 million share placing underlined the shareholder support the company enjoys and has allowed the explorer to move full throttle into the next phase of development.

In a research note published recently, American investment bank Citi said Kurdistan is set for a “major period of news flow” as independent exploration companies embark on ambitious drilling campaigns in the semi-autonomous region.

Based on data from the US Geological Society, Kurdistan could hold over 50 billion barrels of oil – which means it is comparable in scale to Libya.

Counterbalancing this excitement is uncertainty over the production sharing contracts being issued by Kurdistan, which are still being disputed by the authorities in Baghdad.

These concerns are further exacerbated by the news that some oil companies aren’t receiving full payment for their oil exports.

“Both issues are unlikely to be resolved until and Iraqi oil and gas law is ratified, in our view,” Citi said in the recent note penned by Michael Alsford and Mukhtar Garadagh.

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