Gulf Keystone Petroleum to generate first oil revenue from Kurdistan with Shaikan-1 production test

Iraq and Algeria operating Gulf Keystone Petroleum (LON:GKP) has said that the initial loads of production facility equipment to the Shaikan field location have arrived and that the AOS Discoverer-1 drilling rig has commenced the rig move to the Sheikh Adi-1 exploration well site.
The equipment together with the oil storage tanks and truck loading facility will form the basis of an 18,000 bopd (barrels of oil per day) capacity oil production treating and truck loading facility, to be used during the long term production testing of the Sargelu oil reservoir in the Shaikan-1 discovery well. Sargelu has demonstrated natural flow rates of almost 7,500 bopd, despite limitations of the original test equipment. Through the testing it is intended that production will be processed, through the facilities currently under construction, and subsequently sold.
Production testing will last for at least 18 to 24 months and accumulate valuable data related to reservoir characteristics and oil recovery factors. The testing volumes of 8,000 to 10,000 bopd are expected to generate Gulf Keystone’s first oil production revenue in Kurdistan.

The company simultaneously announced that the AOS Discoverer-1 drilling rig had arrived at the Sheikh Adi-1 well site and rig up was 10% complete. The well, which will be the company’s first on the Sheikh Adi block, is planned for spudding in August and will be targeting the Cretaceous, Jurassic and Triassic formations. Drilling is expected to take six months.

Gulf Keystone has estimated the oil-in-place resource potential for the Sheikh Adi structure to be in excess of 1 billion barrels.
Gulf Keystone has raised US$165 million back in May, through a fully subscribed institutional placing, to fund the 2010 and early 2011 work programmes in the Kurdistan region in Iraq.
The major Shaikan-1 discovery was the company’s first exploration well in Kurdistan, and it provided GKP with its key operational highlight in 2009. To date, the well has an independently assessed resource in the range of 1.9bn barrels to 7.4bn barrels, with further upside potential identified.
Shares in the company rose 3% on the update.