Leni Gas & Oil preparing Hontomin-2 test as CIUDEN starts fully-funded seismic program

Leni Gas & Oil (LON:LGO) has reported that the first seismic program under its joint development deal with Fundación Ciudad de la Energia (CIUDEN), is now underway at the Hontomin oilfield in Spain. The seismic program is fully funded by CIUDEN, with both ultra-sensitive and 3D seismic surveys being carried over an area of approximately 10km2 centred on the Hontomin reservoir.  The program will continue until August 2010. 

Separately, Leni Gas & Oil intends to start preparing an extended well test programme at Hontomin-2, to assess the production potential of the Hontomin reservoir.

The joint development agreement was initially signed in March 2009, allowing CIUDEN to carry out research, testing and implementation of carbon dioxide (CO2) sequestration pilot sites on LGO's Spanish acreage. The agreement also provides for the full bi-lateral sharing of results and data from all programs executed by the Leni Gas & Oil and CIUDEN.
"The joint development agreement with CIUDEN has considerable scope for investigating the potential of carbon capture and storage, and related enhanced oil recovery opportunities within our acreage", Leni Gas & Oil chairman David Lenigas commented.

"The seismic program on Hontomin is the practical start of this agreement to realise this potential and increase the value of this prospect within our Spain acreage.  We look forward to working closely with CIUDEN to maximise the value of Hontomin from this program and our imminent extended well test on Hontomin 2."

Hontomin has mean contingent oil resources of 0.36 mmbo (million barrels of oil). It is anticipated that oil production from Hontomin-2 will be transported to the company's central processing and sales facility, at 38km away at Ayoluengo.

Furthermore, Leni Gas & Oil said that the results of the extended well test program and CIUDEN seismic survey shall input to the company's exploitation strategy for Hontomin, for either conducing further appraisal or converting the exploration permit to a production concession.

In May this year, the company reported strong progress in Spain, with a comprehensive geological re-interpretation of the Ayoluengo oilfield, completed with reprocessed 3D seismic. It has substantially de-risked the future production expansion programs there and led to a major increase in STOIIP (Stock Tank Oil Initially In Place) estimates for the producing Lower Cretaceous and Upper Jurassic reservoirs.

Total STOIIP of the currently assessed prospects across the acreage which can be developed is now 173.8 million barrels of oil Mean, 265.2 mmbo P10 (Possible), 151.4 mmbo P50 (Probable), and 108.3 mmbo P90 (Proved).  Mean STOIIP had previously been 104 million barrels. The field had a historical production of 17 mmbbls of 37 API oil.

Also in May, the company announced the completion of a heads of agreement with BP’s (LSE: BP) Spanish unit to negotiate a crude oil sales agreement to off-take its current and future production to BP's Castellón refinery on the east coast of the country. The planned agreement is for at least five years and shall include Ayoluengo and future production from other development assets across LGO’s petroleum production and exploration acreage in northern Spain which covers an area of over 550 square kilometres.