Operations

Post-salt drilling programme

Since 31 March 2011, the Group has drilled a total of 14 post-salt wells, including five exploration wells generating two commercial discoveries and 10 successful appraisal and development wells over three fields. 

Since January 2010, the Group has drilled five commercial discoveries out of 14 exploration wells, a success rate of 36%. The Group’s success rate has improved as it has incorporated learnings into its ongoing drilling programme with a greater focus on the Triassic rim play type that has proved successful at the Group’s Zhana Makat, Borkyldakty, and Sagiz West discoveries.

As of January 2012, the exploration portfolio contains six post-salt Triassic rim prospects, with unrisked mean resources totalling 59 mmbo. The post-salt prospect inventory includes a further three leads which may mature into additional post-salt prospects to be drilled in calendar year 2012.

The Group’s exploration success in the post-salt is beginning to be reflected in its 2P reserve estimates, with 2P reserves increasing 70% from 31 March 2011 based on new discoveries at East Kyzylzhar I and Sagiz West. The Group’s Competent Person, Ryder Scott Company, estimates that at 30 September 2011, the Group had 13.3 mmbo in 2P reserves with an after-tax net present value discounted at 10% (“PV10”) of US$246 million, compared to 2P reserves of 7.8 mmbo in the prior fiscal year with a PV10 of US$176 million. Ryder Scott also assigned 1.5 mmbbls of possible reserves and 61.3 mmbbls of contingent resources in place to the Sagiz West discovery, which the Group expects to evaluate before 31 March 2012 through its ongoing appraisal drilling programme. The Group’s Uytas discovery was not included in the 30 September 2011 Competent Person’s report, as the Group plans to have Ryder Scott prepare a separate resource/reserve update for the field during the quarter ended 31 March 2012 based on core data that is currently being evaluated and the recently completed 27 km2 3D seismic survey acquired over the field. The Group expects its 2P reserves to continue to grow substantially over the next two years as it both drills through its remaining exploration prospect inventory and continues to appraise and develop its existing discoveries. 

A field level comparison of proved and probable reserves, calculated by Ryder Scott, as of 30 September 2011 and 31 March 2011 is as follows:

Zhana Makat Field

The Group’s Zhana Makat Field continues to perform well, with average daily production of approximately 2,100 bopd for the year ended 31 March 2011 from a combination of Jurassic and Neocomian reservoirs. The field has been on commercial production under a trial production project (“TPP”) since August 2007, with cumulative production of 2.8 mmbo generating US$166 million in total revenue through 31 March 2011. In December 2011, the Kazakh government extended Zhana Makat’s TPP until 15 March 2012, while the Group seeks final regulatory approval to convert Zhana Makat to full field development (“FFD”) status under its Blocks A&E Licence. FFD status will allow the Group to develop and produce the field for up to 25 years, as well as grant the Group a right to sell 80% of its crude oil production on the export market under the terms of its Blocks A&E Licence.

During the quarter ended 30 June 2011, the Group successfully drilled the ZMA-ET1 and ZMA-ET2 appraisal wells extending Triassic production and reserves in the southern end of the field, and in September extended Jurassic production at Zhana Makat with the ZMA-A23 development well. In October the ZMA-E2 appraisal well successfully tested Jurassic reservoirs which will allow reclassification of probable to proven reserves in the area and help define additional offset drilling locations. The Group has two to three additional appraisal and development well locations in the Zhana Makat Field, which it intends to drill over the next 12 months, all of which target Jurassic reservoirs. 

Borkyldakty Field

The Borkyldakty Field was discovered in Block E in February 2010, with the BOR-1 well encountering five productive Triassic reservoirs in a small four-way anticlinal structure. The Group drilled a non-productive appraisal well in May 2010, limiting the overall size of the field, but infill 3D seismic acquired over the structure subsequently identified at least one additional drilling location.

In May 2011, the Group received regulatory approval of Borkyldakty’s TPP, allowing the Group to produce the field and drill additional exploration and appraisal wells, if necessary, in order to gather additional data needed to prepare a full field development plan. The TPP is valid until March 2013.

In July 2011, the Group successfully drilled and completed the BOR-3 well, encountering 28 metres of net oil pay over five Triassic sandstone reservoirs.  Both wells have been placed on production under the terms of the TPP, with 100% of the production being sold on the domestic market. The Group does not plan on drilling another well in the Borkyldakty Field in 2012.

Uytas Field

The Uytas Field, a shallow, four-way anticline with productive Cretaceous and Jurassic reservoirs, was discovered in Block A in October 2010. Drilled to a depth of 827 metres, the UTS-1 discovery well made the Group’s largest post-salt discovery to date. Uytas is a unique field given its shallow depth, with productive Cretaceous reservoirs above 200 metres and Jurassic reservoirs between 300 and 400 metres.

Initial production tests performed on the UTS-1 discovery well indicated a 55 metre oil column with 31 metres of net oil pay in the Cretaceous section, with perforations at depths ranging from 120 to 128 metres and 155 to 158 metres producing 26 degree API gravity crude oil on pump at indicative rates of approximately 24 barrels of oil per day during a brief clean-up period. The Group also produced 27 degree API oil at an indicative rate of approximately 40 barrels per day from perforations in a Jurassic reservoir from depths of 373 to 377 metres during a brief clean-up period.

Based on a probable oil/water contact at 161 metres as indicated by revised petrophysical analysis and current mapping, the potential oil in place for the Cretaceous reservoir is estimated to be between 85 and 135 million barrels of oil. While other Cretaceous fields in the Pre-Caspian Basin from similar depths report recovery factors between 20% to 30% of original oil in place, long-term testing and pressure analysis of the discovery well, combined with confirmation drilling and a new seismic survey specifically focused on these shallow reservoirs, will be needed to define more accurately recoverable oil reserves. Enhanced recovery techniques, such as water flooding, may also be needed to improve recovery from such shallow depths with low reservoir pressure.

In August 2011, the Group drilled the first of three appraisal wells in the field. The UTS-2 well reached a total depth of 820 metres, with electric logs indicating 12 metres of net oil pay in the Cretaceous section at depths ranging from 108 to 148 metres, consisting of three sandstone reservoirs of excellent quality with porosities ranging from 25% to 34%. The Group also identified an additional six metres of net oil pay in Jurassic reservoirs at depths of approximately 350 metres. Significant oil shows were recorded continuously from depths of 36 to 150 metres, which appear to confirm the oil column seen in the original UTS-1 discovery well. Consequently, the Group extensively cored the UTS-2 well over the interval from 39 to 160 metres to allow further study of reservoir properties within this vertical column. The core analysis will also be used to evaluate the potential of additional lower quality reservoirs present in the Cretaceous in this interval that have not been included here as net pay. Furthermore, Cretaceous reservoirs above 80 metres that were not evaluated on electric logs due to their shallow depth may be tested in this well or subsequent wells pending the final core analysis. 

At the end of August the Group drilled a second appraisal well at Uytas. The UTS-3 well reached a total depth of 825 metres, with electric logs indicating a total of 31 metres of net oil pay in Cretaceous and Jurassic formations. This included 17 metres of net oil pay in Cretaceous sandstone reservoirs at depths ranging from 120 to 150 metres, with porosities ranging from 25% to 34%. In addition, 14 metres of pay were indicated in Jurassic reservoirs at depths ranging from 422 to 509 metres. 

In September 2011, the Group drilled the UTS-4 confirmation well in the Uytas Field. The UTS-4 well reached a depth of 849 metres, with electric logs indicating 36 metres of potential net oil pay in the Cretaceous section at depths ranging from 30 to 158 metres, consisting of six sandstone reservoirs of excellent quality with porosities ranging from 25% to 35%. This includes 16 metres of potential net pay in the shallow Cretaceous section between depths of 30 and 57 metres, which were not evaluated in the UTS-2 well because the equivalent interval was not logged. Significant oil shows were recorded continuously from depths of 20 metres to 167 metres, which appear to confirm the oil column seen in the original UTS-1 discovery well. The Company cored the UTS-4 well over the interval from 24 metres to 47 metres to allow further study of reservoir properties within this vertical column, with results from the core analysis expected during the fourth quarter of 2011. Additionally, significant shows of oil and gas not observed in prior wells were recorded in the Kungurian salt near total depth of the well.  The UTS-4 well was not designed to evaluate this interval, which will be investigated further in a future well. The Jurassic reservoirs found in earlier wells were not well developed at this location, however, and no pay was logged in the Jurassic section of the well. The Company acquired a high-fold 3D seismic survey over the Uytas structure in October 2011, in order to facilitate preparation of a long-term appraisal and development programme for the field. 

Asanketken Field

The Group commenced drilling the ASK-1 exploration well on the Asanketken prospect in Block E in February 2011, principally targeting Triassic reservoirs with secondary objectives in the Jurassic. A Jurassic discovery in the well was announced on 1 April 2011, with electric logs indicating 24 metres of net oil pay at depths from 1,230 to 1,302 metres in the Jurassic formation in a three-way faulted closure. The Group estimates that the Jurassic reservoirs encountered in this wellbore contain between four to seven mmbo in place with expected oil recovery factors ranging from 35% to 40%. The ASK-1 well was put on test production in late September and produced at a stable rate of 672 barrels of oil per day.

Due to mechanical problems encountered below 2,000 metres, the Group decided to complete the ASK-1 well as a Jurassic producer and drill a second well, ASK-2, to i) test the prospect’s Triassic potential, ii) evaluate additional Jurassic reservoirs above the initial Jurassic fault-block discovery, and iii) appraise the Jurassic discovery from the first well. In October the ASK-2 well reached an intermediate casing point at 2,000 metres where electric logs indicated Jurassic reservoirs that correlated to the reservoir previously tested by ASK-1. On 9 December 2011, the Group announced that the ASK-2 well had been drilled to a total depth of 3,412 metres without encountering any viable reservoirs in the deeper Triassic section, which was the primary objective. The well will as a result completed as a production well in the shallower Jurassic reservoir at depths between 1,281 and 1,287 metres.  

East Kyzylzhar I Field

The East Kyzylzhar I Field, a three-way faulted closure located in Block E, was discovered in August 2011, with the KZIE-1 exploration well encountering 17 metres of net oil pay in two Jurassic sandstone reservoirs at depths ranging between 987 and 1,251 metres. Reservoir quality appears excellent with porosities ranging from 20% to 30%.The Company began testing the KZIE-1 discovery well in the East Kyzylzhar I Field, flowing 42 degree API oil at a stable rate of 1,484 barrels of oil per day (“bopd”) on a 24/64” choke with flowing tubing head pressure of 20 bars during a 24 hour test period from six metres of perforations in a Jurassic reservoir at true vertical depths ranging from 1,110 to 1,118 metres. The well has been connected to temporary production facilities and is on long-term test production.

On 22 December 2011 the Group announced that the KZIE-2 appraisal well in the East Kyzylzhar I Field had reached a total depth of 1,294 metres, with electric logs indicating seven metres of net oil pay, including two metres in the Cretaceous Neocomian reservoir at depths from 627 to 629 metres, and five metres in the Jurassic reservoir at depths from 1,214 to 1,220 metres. Reservoir quality appears excellent with porosities ranging from 25% to 30%. The Company will run production casing in the well, which will be completed and placed on test production after obtaining the requisite governmental approvals.  

Sagiz West Field

The Sagiz West discovery was made in September 2011. The well reached a depth of 1,406 metres with electric logs indicating 27 metres of net pay, including 21 metres of oil and 6 metres of gas pay, over a 114 metre interval in the Triassic formation at measured depths between 1,177 and 1,291 metres. Reservoir quality is very good with porosities ranging from 18% to 25%.

On 28 December 2011 the Company announced that the SAGW-1 well has begun testing in the lower-most Triassic reservoir from depths between 1,273 and 1,280 metres. The well flowed from this interval at an initial rate of 82 barrels of oil per day, with no water. This interval exhibits lower porosity and permeability than the four shallower Triassic zones which will be progressively tested in this well and appears a good candidate for stimulation to enhance productivity, such as hydraulic fracturing. The well is expected to l be recompleted into a shallower reservoir in January 2012. 

On 28 December 2011 the Company announced that it completed drilling the SAGW-2 appraisal well in the Sagiz West Field on Block E with the well reaching a total depth of 1,451 metres without encountering producible hydrocarbons. Extensive shows of oil and gas were seen in the well throughout the Triassic section, indicating close proximity to the edge of the Field. The Company is integrating the results of the well into the geophysical evaluation of the Field, and plans to proceed to drill two additional appraisal wells beginning in January 2012. The SAGW-2 well will be cased for future use as an injection well during future field development. 

Pre-salt exploration programme  

The Group’s significant pre-salt portfolio of ten prospects and five leads ranging in size from 100 to 600 mmboe of estimated unrisked mean resources was developed late in 2009 using a combination of the new 3D seismic acquired by the Group and regional geologic play concepts developed by our technical team using analogies from elsewhere in the Pre-Caspian Basin and other similar basins around the world. Total unrisked mean resource potential for this portfolio is estimated by the Group at over four billion barrels of oil equivalent (“bboe”). The majority of this potential resource is found in the “Type II” prospects which are interpreted to be ancient coral reefs of Devonian age, in part analogous to the other super-giant fields in the Basin. Of particular importance to these “Type II” prospects is the fact that they share a single common risk factor - reservoir quality.  Success on the first NUR-1 well at the Emba B prospect would significantly improve the chance of success on the remaining prospects and leads. The Group spudded the NUR-1 well in early November 2011. Drilling is expected to take up to six months. Depending upon the results of NUR-1, the Group will drill another Type II prospect or will move the deep rig to test the Type I, Kuzbak prospect on Block E. As of 31 October 2011, the Group estimates the forward costs to drill the NUR-1 well to be US$21.0 million, net of US$8.6 million in drilling costs incurred to date, and the forward costs to drill a Type I well to be approximately US$20.0 million.