The BNG Contract Area is located in the west of Kazakhstan 40 kilometers southeast of Tengiz on the edge of the Mangistau Oblast, covering an area of 1,487 square kilometers of which 1,376 square kilometers has 3D seismic coverage acquired in 2009 and 2010. Caspian Sunrise, then known as Roxi Petroleum, have been operators of the Contract Area since 2011.
In January 2016, Caspian Sunrise announced that the area of the Contract Area was extended with the addition of 140.6 square kilometres to the northeast of the current block. The extended BNG Contract Area now covers 1,702 square kilometers.
Our development approach
The BNG Contract Area is similar in size to the area bounded by London’s M25 Motorway. It is in a remote region highly successful in oil production, being only 40 kilometers from the world renowned Tengiz field.
The Contract Area has a number of areas of interest both above the salt layer (shallow) and below the salt layer (deep).
Development of the shallow prospects is technically far easier than the deep prospects and much cheaper. Shallow well costs have typically been approximately $1.25 – $1.5 million with successful wells repaying drilling costs in little over 12 months even though production may only be sold at domestic prices ($10-16 per barrel in recent times).
Production from a successful shallow well might be approximately 600 bopd.
Development of the deeper prospects is technically difficult with problems from high pressure and temperature to be overcome. The costs of the deep wells drilled have been between $8-15 million.
The rewards from a deep well are however expected to be much greater with wells expected to flow at rates between 2,000 – 3,000 bopd and oil of a significantly higher quality which on the open market would command a premium over the oil produced from the shallow wells.
The quantity of oil to be discovered and produced from the deep prospects is also expected to be very significantly greater than from shallow prospects.
We therefore have a mix of shallow and deep development activities. The shallow wells are quick to drill and have an excellent pay back period, which is funding continued development. The aggregate production from these and other shallow wells will in the board opinion be the basis for a very successful company without any contribution from the deep prospects.
However the addition of successful deep prospects materially increases the size of the reserves attributable to BNG and the value of the Contract Area and our company.
South Yelemes structure
Exploration of the South Yelemes Structure began during the Soviet Era. Caspian Sunrise has re-entered one former Soviet era well, (well 54), and drilled a further 3 wells (805, 806, 807) on the structure. Recently Well 54 was perforated across an interval from 1,961 to 1,971 meters and from which it is producing at the rate of 30 bond. The aggregate production from the others wells on the structure is in excess of 150 bopd.
Four wells (141,142, 143 and 144) have to date been drilled on the MJF structure. These well re in aggregate producing at the rate of approximately 1,700 bopd.
The success of these four wells demonstrates the MJF structure extends over an an area at least 10km2 in size.
Two new wells, 145 and 146, are planned for 2017. In the event these are successful, the area of the MJF structure should extend even further.
Analysis of the results as at 31 December 2015 of the South Yelemes and MJF structures 143 led to Gaffney Cline to ascribe 29.3 mbls of P2 reserves to them, which at time constituted the total of our shallow development activities.
A potential new structure has been drilled with well 808 which has a planned total depth of 3,200 meters. Testing to date of Well 808 has been inconclusive.
Shallow reserves update
Following completion of Wells 145 and 146 we intend to commission Gaffney Cline to update their reserve estimates including new information on Wells 141, 142, 144, 145 and 146 together with reconsideration of Well 143.
Work in the period under review and subsequently has focused on getting the three wells drilled to flow freely to allow well tests to be undertaken.
Deep Well A5
Deep Well A5 was the first of the deep wells to be drilled. High pressure and temperature resulted in a difficult drilling phase and as a result we decided to leave the well to be tested on an open hole basis.
The well has regularly produced for a few hours at the rate of 2,000 bopd but is not yet ready for a prolonged well test.
We are working on a side-track from a depth of 4,000 meters following which we hope to be able to conduct the long waited flow test.
Deep Well 801
Deep well 801 was the second deep well to be drilled and was drilled under contract by Sinopec, the leading Chinese contractor.
As with Deep Well A5 the issue was that the high pressure in the well has made clearing the drilling fluid used while drilling to control the well very difficult. Also as with Deep Well A5 the well has flowed for regular short periods at rates of 2,000 bopd before becoming blocked.
The technique being used on this well is a mixture of chemical washes and to use the natural pressure in the well to slowly remove the excess drilling fluid.
Deep Well A6
Deep Well A6 was the third deep well drilled. Lessons were learned from the earlier wells and with the exception of delays penetrating the salt layer the drilling of the well was less eventful than for well A5 or 801.
A gross interval of in excess of 100 meters was identified from mud and wireline logs as being potentially hydrocarbon bearing. The lower 55 meters were perforated by a leading international contractor.
That perforation failed to penetrate more than 1.5 meters of the 55 meters attempted and the intended flow test was not possible. However, before the failure the perforation was apparent we moved the drill pipes and drilling fluid to Deep Well A5 which has prevented an early attempt to re-perforate Deep Well A6.
In August 2017 an interval of 60 meters was reperforated using more powerful equipment. To date, the results of the reperforation have been inconclusive. Further stimulation work is to be conducted.
In June 2015 the BNG licence was successfully extended until June 2018. During this Estimation Phase any oil produced from exploration and appraisal activities at BNG must be sold on the domestic Kazakh market, with prices significantly lower than international prices.
In January 2016, Caspian Sunrise invested a further $2 million in extending the area of its BNG Contract Area by 140.6 square kilometres to the north west of the existing BNG Contract Area. The minimum work programme commitment for the extension area is one additional well.
The licence at Munaily is a full production licence, with an expiry term of 8 years where production can be sold at export prices. Our work programme commitments at Munaily will be satisfied by the well re entry programme in operation there.