Gulf Keystone Update

In addition to the presently producing Shaikan-1 and Shaikan-3 wells, Shaikan-4 is now tied into PF-1, has started to flow and is expected to increase the current output in Q2 2014. An amine plant is currently being connected to PF-1, which will allow sweetening of some of the associated gas stream, which will be used as fuel for the PF-1 operations instead of diesel, representing savings of approximately US$400,000 per month to the project.

The Shaikan-2 and Shaikan-5 wells have now been tied into PF-2 and the production facility is currently being commissioned with first production, initially of approximately 10,000 bopd, expected in Q2 2014. The connection of Shaikan-10 to PF-2 will also be completed in Q2 2014, increasing PF-2 production capacity.

The Company is focused on achieving the target of 40,000 bopd of production capacity from PF-1 and PF-2 in 2014, which it intends to reach through:

  • Potential re-configuration of Shaikan-8, initially drilled as a gas injection well, into a fourth producer tied into PF-1
  • Tie in of the deep exploration well Shaikan-7, which is currently being drilled, to become the fifth producing well at PF-1
  • Productivity enhancement of the Shaikan-1 and Shaikan-3 wells through the replacement of the existing 3 ½" tubing by 4 ½" tubing
  • Plans to drill an additional production well in the proximity of Shaikan-10, which will also be connected to PF-2, and install four flowlines between the Shaikan-10 location and PF-2

The Company's focus is on the ramp-up of commercial production from the existing Shaikan facilities. The move to 40,000 bopd of production capacity will allow further expansion of export crude oil sales. The additional cash generated, in addition to the Company's near term debt financing options where the Company is making progress in its discussions, will facilitate the move to the next stage of the Shaikan project execution.

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