DNO appraisal confirms Iraq oil field extension

HOUSTON, Nov. 27 -- DNO ASA reported that the Tawke-2 appraisal well tested 3,840 b/d of oil, confirming the western extension of Tawke oil field in northern Iraq.

Tawke-2 is about 2 km west of the Tawke-1 discovery well, closer to the crest of the structure. Preliminary evaluation of Tawke-1 had indicated oil in place to be 330 million bbl and had estimated P50 gross recoverable oil reserves at 100 million bbl (40 million bbl net), with a 30% recovery factor (OGJ, June 19, 2006, p. 8).

Tawke-2 tested the same zone as Tawke-1 and 1A, and preliminary evaluations completed to date indicate that the reserves related to this reservoir zone alone may be higher than those original estimates. However, further work is required to revise the reserve figures, including interpretation of the new 3D seismic and a remapping of the Tawke structure. In addition, Tawke-2 has yet to penetrate and test additional shallow reservoir levels.

The production test from Tawke-1, 1A, and Tawke-2 were carried out under different well completion environments. DNO believes that there is potential for improvements in the individual well production capacity by optimizing the completion and well stimulation techniques.

The Kurdistan Regional Government (KRG) has approved the Tawke field development plan, and oil production from this field is scheduled to start in first quarter 2007.

DNO has secured the pipeline and central processing facilities (CPF) for the field's early production development. Feasibility studies based on the Tawke crude quality confirm that the pipeline and CPF will have the capacity to deliver about 50,000 b/d of oil after some modifications.

The company plans to accelerate development drilling in the Tawke area, and will mobilize a third, smaller rig in early 2007.

The larger rig, currently drilling the Khanke-1 site, may also be mobilized into the Tawke area after completion of Khanke-1 and another exploration well. Thus, a total of three drilling rigs could be operating in the Tawke area during most of 2007.

Meanwhile, DNO plans to carry out two production tests at the Khanke-1 well, which is being drilled to 3,500 m TD.

DNO holds a 40% interest in the Dihok PSA, which includes the Tawke oil discovery, and the Erbil PSA further to the south.

Subject to an agreement yet to be finalized with KRG, DNO will carry 100% of the funding for the PSAs in return for an additional 15% working interest. The exploration and development expenditures to date are related primarily to the Dihok PSA, and DNO expects these costs to be fully recovered in 2007 if the current Tawke early production plan is achieved.

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