Operations - Iraq
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Iraq has the second largest oil reserves in the world, estimated at more than 112 billion barrels of oil and 100 trillion cubic feet of gas. The Kurdistan region of Iraq is a highly prospective, under-explored part of Northern Iraq.
Heritage Energy Middle East, a wholly owned subsidiary, was one of the first companies to be awarded a Production Sharing Agreement (PSA) by the Kurdistan Regional Government (KRG), a PSA having been executed over the Miran Block in the Kurdistan Region of Iraq in October 2007. Heritage has been appointed operator of the licence, which covers 1,015 square kilometres. The Miran structure itself is potentially very large and may contain multiple reservoir targets. Management estimates that the structure could contain significant quantities of oil.
The Miran structure lies only 55 kilometres from the giant Kirkuk oilfield with its remaining reserves thought to be in excess of 10 billion barrels. In the first half of 2008 Heritage acquired a 330 kilometres seismic survey of over the Miran structure which identified two very large anticlines which have the potential to contain billions of barrels of oil.
Heritage commenced drilling the Miran West-1 well in December 2008, just fifteen months after signing the licence - demonstrating both the operational efficiency of the Company and our commitment to the region. Initial testing operations were completed in May 2009 and the structure, with a gross oil bearing interval of 710 metres, is estimated to have oil-in-place of between 2.3 and 4.2 billion barrels based on fracture porosity alone. Excellent recoveries of between 50% and 70% are expected due to the highly fractured nature of the reservoirs and the lack of associated gas. Initial Miran West-1 drilling operations were designed to cope with the potential for high reservoir pressures and this resulted in the loss of drilling fluid and lost circulation material in these highly permeable fractured reservoirs, whereby initial testing operations were severely constrained.
A further test was completed in August 2009 during which the Miran West-1 well flowed at a maximum rate of 3,640 bopd from a single upper reservoir interval. The test rate was restricted by surface equipment capacity. However, data gathered from the test indicates a rate of 8,000 to 10,000 bopd would be achievable when it is placed on production. Tests on two other deeper reservoir intervals in the well were unsuccessful because of damage and contamination sustained during drilling. Consequently, the remedial measures undertaken during retesting operations were no more effective than during initial testing.
We are very encouraged by this result in a well where the lower formations were badly damaged through drilling. Miran West-1 was the first wildcat exploration well ever drilled on this licence covering two structures which together total approximately 320 square kilometres. We have gathered important information which will be invaluable in advancing our forward programmes on this significant discovery beginning with the Miran West-2 appraisal well, which is planned to spud in the fourth quarter.
Fast-track development of the Miran field is planned to commence by the middle of 2010. Two licence operators in Kurdistan began exporting crude oil on 1 June 2009 via the Iraq-Turkey main export pipeline to the Mediterranean port of Ceyhan.