Max Petroleum acquired the exploration and production rights to the Blocks A&E Licence area in 2005, which includes two onshore blocks extending over 12,455 km2 in the highly prolific Pre-Caspian Basin in Western Kazakhstan. The Pre-Caspian Basin has produced some of the world’s largest oil and gas discoveries, including the super-giant Tengiz, Kashagan, Karachaganak and Astrakhan fields, which range in size from seven to 20 billion barrels of oil equivalent in recoverable reserves. The Basin also has extensive production from numerous shallow, “post-salt” fields, with more than 100 post-salt fields discovered during the Soviet era, with an average mean field size of 34 million barrels of recoverable oil each.
Max Petroleum has acquired and interpreted approximately 5,000 km2 of exploratory 3D seismic data over Blocks A&E, generating an exciting portfolio of post-salt and pre-salt leads and prospects. As of January 2012, the post-salt portfolio comprises six Triassic rim prospects estimated to contain unrisked mean recoverable resources of 59 mmbo, and an additional three leads, to be drilled during the next 12 months. The pre-salt portfolio comprises 10 prospects and five leads, ranging in size from 100 to 600 mmboe of unrisked mean resource potential each, with aggregate unrisked mean resource potential in excess of 4 billion barrels of oil equivalent. In July 2010, the Group’s competent person, Ryder Scott Company LP, estimated Blocks A&E’s mean risked resource potential at 1,100 mmboe, providing independent validation of the work of Max Petroleum’s technical team, as well as the Group’s potential for making a major discovery. The Group is planning to drill two pre-salt wells through 2012, testing 1.1 bboe in unrisked mean resource potential. The first pre-salt well, targeting 467 mmboe of unrisked mean resource spudded in November 2011.
The principal terms of the Blocks A&E licence are as follows:
- Tax/royalty exploration and production contract, executed in March 2003;
- Exploration period of six years plus two two-year extensions. Exploration period expires in March 2013. Production period of 25 years from each commercial discovery;
- Corporate income tax rate of 20%, to be scaled back to 15% by 2014;
- Mineral extraction tax (“MET”) rates ranging from 5% to 20%, dependent upon annual production levels and market price of crude;
- Export rental tax (“ERT”) rates ranging from 0% to 32% based on crude export levels and market price of Brent/Urals;
- Effective 1 January 2011 , introduction of a customs export duty of US$40/ tonne on crude oil exports;
- Commercial discovery bonus fixed at 0.1% of the value of proven extractable resources and payable when a commercial discovery is made on the contract territory; and
- Manageable capital and work commitments.
