Caspian Oil and Gas:Looking to Exit Kyrgyzstan
Perth-based exploration company Caspian Oil & Gas Limited reports its activities for the March 2012 quarter.
Mailisu III # 6 has been re-entered and the stuck perforation guns were removed in April. The well is currently being tested and while oil has been recovered, acidisation will be required before a rate can be determined
Re-perforation and pump testing of West Mailisu #2 failed to produce oil
While a number of enquiries were received on the Kyrgyz farmout package, political instability and short licence tenure have been obstacles to prospective farmin partners
A Kyrgyz Government decree requiring all new licences to be issued under an auction or tender process has thwarted plans to renew the licences expiring at the end of 2012
Technical reviews were undertaken of several oil fields in Kazakhstan, with negotiations and due diligence continuing on one project
June Quarter Plans
Conclude due diligence and if appropriate negotiations on producing asset in Kazakhstan
Work towards farmout or disposal of remaining Kyrgyz assets
Seek new projects, either petroleum or minerals
With additional work in the Kyrgyz Republic unlikely, the Company will seek to sell its drilling rig
Kyrgyz Republic Oil Projects: Background
Caspian Oil & Gas, through its subsidiaries, holds six exploration licences and three production licences in the Kyrgyz Republic section of Fergana Basin in Central Asia.
Caspian maintains a 650hp drilling rig in the Kyrgyz Republic.
During the winter season, only limited work was able to be undertaken on the Kyrgyz Republic oil projects. In late March a crew was able to re-access the Mailisu III #6 well site and recover the stuck perforation guns from the hole. A pump was connected and a small volume of oil returned. The well will need to be acidised before the flow rate can be determined. Excluding Mailisu III #6, monthly oil production from Caspian’s Kyrgyz wells is
approximately 390 barrels.
In January, re-perforation and pump testing Bed III in the Mailisu III #2 well failed to produce oil, notwithstanding the oil recovered when the well was first drilled. This indicates that either the Bed III reservoir is tight or the heavy mud used to drill through Bed III has damaged the formation.
While it may be possible to re-enter the West Mailisu #2 wellbore and sidetrack from immediately above the Bed III reservoir to test the reservoir zone (Beds III & V) without damaging the formation, this will be left for a potential farm-in partner to assess.
Caspian is reassessing its Kyrgyz interests in view of the effect of the new licensing requirements introduced in late April.
The West Mailisu exploration licence remains valid until December 2014. In 2011 the Katran and Ashvaz licences were dropped and Caspian requested new licences for its East Mailisu, Charvak, Ak-Bura and Sulukta exploration projects. Since those existing licences expire at the end of 2012 there is insufficient time for Caspian to complete more seismic, a drilling campaign, reserve assessment and production licence application by December. While the Subsoil Agency had initially indicated that it was amenable to considering the extension request, in late April a decree dictating that new licences can only be issued after tender or auction has precluded the reissue of those licences to Caspian’s subsidiary.
Caspian has actively pursued potential farminees’ for the Kyrgyz acreage. Whilst there has been interest in the licences from some significant parties, to date none of these leads have progressed due to the perceived political risk in the Kyrgyz Republic and the short licence life remaining on most of Caspian’s exploration licences.
A number of opportunities in Kazakhstan have been reviewed and the Company is currently investigating and in negotiations for the purchase of one producing asset in the country