Petroceltic's AT-5 Well Falls Short of Expectations

- Petroceltic's AT-5 Well Falls Short of Expectations

Tuesday, August 02, 2011
Petroceltic International Inc.

Petroceltic in association with its partner Sonatrach issued an update on operations at the Ain Tsila field on its Isarene permit (Blocks 228 & 229a) in south eastern Algeria.

• AT-5 tests gas at a maximum flow rate of 3.50mmscfd
• AT-7 and AT-8 wells spudded
• AT-9 well approved for drilling
• Delineation program on schedule for year end completion

AT-5 Well Test

The AT-5 well was drilled with a 376m of horizontal section through a "pop-up" feature in the Ordovician reservoir at a location about 4km to the east of the AT-1 discovery well. A multistage open hole packer completion with four zone isolation ports was successfully run before the well was suspended for rigless testing. All four zones were then fracture stimulated ("fracked") and a maximum flow rate of 3.50mmscf/d on a 64/64" choke with 60 bbl/d of condensate and 190 bbl/d of water was achieved. While the flow rate is lower than pre-test expectations, this is the third of four wells tested in the Ain Tsila discovery to flow at rates that are likely to be deemed commercial.

Upon completion of the operations at the AT-5 site, the rigless testing unit will be mobilized to the AT-6 location to commence testing operations there. The testing program at AT-6 is expected to be completed in the first half of September.

Appraisal Drilling Update

Well AT-7, which is being drilled by the Dalma rig and is located in the south west of the field outside the 3D seismic survey approximately 10km south of the AT-3 well, commenced drilling on 26th July. It is designed as a vertical well to test the south westerly extension of the field and will be the 4th well in the current campaign.

Well AT-8 which is being drilled by the KCA Deutag rig started drilling on 19th July. This well is being drilled as a vertical well into a "pop-up" feature in the north of the field. The objective of the well is to further delineate the northern part of the field and test a potential fracture zone associated with a seismically mapped fault which may facilitate enhanced productivity rates. It will be the 5th well in the current campaign.

The Algerian Authorities have also recently approved the drilling of the 6th well, AT-9. This well will be the second well with the KCA Deutag rig following completion of drilling operations at AT-8. It is located in the center of the field between wells AT-1 and AT-2 and will be drilled as a horizontal well designed to test a structurally different style of "pop-up" with seismically interpreted fractures and faults.

With the addition of the second rig, the current six well delineation program will be completed by year end to allow for the preparation of the Final Discovery Report for submittal to the Algerian authorities by the end of Q1 2012.

Petroceltic operates the permit with a 56.625 % interest, Sonatrach holds a 25% interest, and Enel holds 18.375% interest, pending final Government of Algeria ratification.

Brian O'Cathain, Chief Executive of Petroceltic commented, "While we are disappointed that the AT-5 flow rates did not meet our pre-test expectations, the well has achieved a commercial flow and provided important operational data in respect of the future design, drilling and testing of appraisal and development wells in the AinTsila Field. This is the third of the four wells tested to date to flow commercial rates of gas and further demonstrates the extent and scale of the discovery.

"Operational activity is now at a peak with two rigs and a rigless testing unit currently active in the field and we await with interest the results of the remaining wells in this current campaign."

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China Short Lists 6 Firms for First Shale Gas Auction

China Short Lists 6 Firms for First Shale Gas Auction

Tuesday, April 26, 2011
Dow Jones Newswires
by Jing Yang

China has short listed six domestic firms to participate in the nation's first shale gas auction, which has been postponed to May, an official with the Ministry of Land and Resources said Tuesday.

Shale gas, which recent technologies have started liberating from relatively impermeable rock, could help China to slow its growing reliance on imported energy. Chinese companies have been gaining know-how in the shale gas drilling from pioneering U.S. partners. The auction marks a move to exploit on a large scale the clean-burning fuel, of which it has identified massive reserves.

The six firms--PetroChina, China Petroleum & Chemical, Cnooc, Shaanxi Yanchang Petroleum Group, China United Coal Bed Methane and Henan Provincial Coal Seam Gas Development and Utilization--will bid for eight shale gas blocks, the official said.

The ministry will likely hold at least one more auction later this year, which could allow more companies, such as Sinochem Group and China Zhenhua Oil Co., to participate. As these two companies don't yet have domestic mining licenses, they can't bid in the current tender, he said.

Technical advances allowing the development of shale gas have transformed the U.S. energy sector in recent years, prompting a wave of merger-and-acquisition activity and sharply reducing reliance on gas imports.

Earlier this year, Cnooc Ltd. bought into several shale oil and gas leases in the U.S. owned by Chesapeake for $570 million in cash, following a similar deal in October.

A recent report from the U.S. Energy Information Administration showed that China holds 1,275 trillion cubic feet of technically recoverable shale gas reserves, the largest in the world.

The nation has invited U.S. and European companies into its tightly controlled onshore gas acreage in order to gain technical know-how. The firms that win blocks in the upcoming auction will also be allowed to work with foreign companies.

PetroChina completed the drilling of China's first horizontal shale gas well last month in Sichuan province. Horizontal shale gas wells are more productive and have proven to be more commercially viable compared with vertical wells.

Production of unconventional gas, such as coal bed methane and shale gas, is expected to reach 20 billion cubic meters annually by 2020, while output of conventional natural gas will rise to 200 billion cubic meters a year, the Research Institute of Economics and Technology of China National Petroleum Corp. forecast in an annual report earlier this year.