The well intersected hydrocarbon-bearing intervals over approximately 1,800 metres within the Cretaceous section, which was the initial appraisal objective of the well. Additionally, within the Jurassic section of the well, wire-line logging, in conjunction with hydrocarbon shows and down-hole sampling have already resulted in the definition of a number of hydrocarbon-bearing fractured intervals suitable for flow testing. Testing of all of these intervals, in addition to those already secured behind casing in the Cretaceous section of the well, is planned after reaching total depth. Drilling is proceeding as planned to a total depth of 4,600 metres to investigate further potential in the underlying Triassic section.
The acquisition of 3D seismic over the Miran Block is scheduled to begin in the fourth quarter of 2010 and will help define further appraisal drilling locations designed to exploit the reservoirs' fracture networks. The Miran West-1 well, and other Kurdistan drilling, have demonstrated that where open fractures are encountered in wells, the reservoirs can support potential production rates of up to 10,000 bopd.
Future plans for drilling in Kurdistan will focus on appraisal drilling on the Miran West structure which, depending on rig availability, will start in the first half of 2011. The Miran East-1 exploration well will also be drilled in 2011 and we are currently considering whether to contract one or two rigs for the drilling programme next year.
Russia
Production averaged 583 bopd in the first half of 2010, an increase of 152% from the six month period ended 30 June 2009. During the second quarter, the first export sales of Zapadno Chumpasskoye crude via the Black Sea were completed. Work continues on the Chumpasskoye Field and well P14, initially drilled in 1977, has been re-entered and re-logged. The Jurassic and Cretaceous potential reservoirs in P14 are to be retested during the latter part of the year. Field development work is continuing and we have commenced design and tendering phases for the horizontal drilling programme which is scheduled to begin at the end of the year.
Malta
In Malta, Heritage has an extensive data set of approximately 3,500 kilometres of 2D seismic which was acquired in 2000. The acquisition of a further 1,000 kilometres of 2D seismic is planned to commence in the fourth quarter of 2010. Current data indicates the presence of a variety of potentially significant prospects which could contain approximately 500 mmboe. Discussions are ongoing to contract a rig for drilling in 2011.
Pakistan
During the first quarter of 2010, 336 kilometres of 2D seismic was acquired on the Zamzama North Licence in Pakistan. A structure has been identified and planning has begun for an exploration well. Due to the recent floods in our licence area this has been delayed until the first quarter of 2011. With gas infrastructure close to the licence, the potential exists for discovered hydrocarbons to be brought into production relatively quickly.
Tanzania
In Tanzania, Heritage is actively looking to firm up leads on drillable prospects in all areas through the reprocessing of existing 2D seismic and the possible acquisition of additional seismic data.
Mali
In Mali, 1,000 kilometres of 2D seismic will be acquired towards the end of the year to identify potential drilling targets. Previous drilling in the region encountered oil and gas shows indicating the potential for a working hydrocarbon system.
Democratic Republic of Congo
In June 2010, the DRC government took the extraordinary step of awarding our existing licences (Blocks 1 and 2) via Presidential Decree to two British Virgin Islands-registered companies. The operator has commenced legal proceedings to challenge that award. $1.6 million is capitalised and no impairment has been recognised.
Corporate Overview
In December 2009, a Sale and Purchase Agreement (the "SPA") was executed with ENI International B.V. ("Eni") to sell Heritage's 50% working interests in Blocks 1 and 3A in Uganda (the "Assets"). In January 2010, Tullow Uganda Limited ("Tullow") exercised its right of pre-emption on the same terms and conditions as agreed with Eni. The transaction completed on 26 July 2010. The Government of the Republic of Uganda ("Government") has assessed the sale as a taxable event which, after taking legal advice, we dispute. Heritage's position, based on comprehensive advice from leading tax experts in Uganda, the United Kingdom and North America, is that the disposal of the Assets is not taxable in Uganda. We pride ourselves on our track record of compliance and good relations in all of the jurisdictions in which we operate and intend to pay any lawfully imposed tax. Discussions with Government continue with a view to resolving the tax dispute.
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