SYRIA

Emerald, through its 100% owned subsidiary SNG Overseas Ltd, holds a 50% working interest in Block 26 which is located in northeast Syria. The rights to explore, develop and produce oil and gas within certain parts of Block 26 are granted under a contract with production sharing terms (PSA). Following the mandatory relinquishment of 25% of the block in August 2007, the block area is currently some 8,250 square kilometres. Gulfsands Petroleum Syria Ltd is operator and holder of the remaining 50% interest.

Within Block 26 boundary there are several discovered fields owned by the Syrian Petroleum Company (SPC) with reserves in excess of 2 billion barrels. Some of these fields are currently operated by SPC with current production over 100,000 barrels of oil per day. Included in these SPC fields is Souedieh, the largest oil field in Syria. These fields produce medium gravity oil, approximately 26 API density, from Cretaceous limestone reservoirs. The oil is transported via existing infrastructure for domestic refining or export; produced gas is treated locally and used as fuel for local needs and power generation. The rights to these existing discovered Cretaceous fields are excluded from the PSA for Block 26. The PSA does grant the right to explore for new Cretaceous fields and all the deeper rights within Block 26 boundary.

In summary, during the initial 4 year exploration period that ended in August 2007, over 1,400 km of 2D seismic data was acquired, processed, and interpreted; three exploration wells were drilled with one discovery, Khurbet East, and a fourth well was drilled to appraise this discovery.

Khurbet East Field

In February 2007 an exploration well was spudded on the Khurbet East prospect, a fault-bound structural culmination, located approximately 12 kilometres southwest of the Souedieh oil field and 12 kilometres south of the Roumelan oil field, with closure mapped at several potential reservoir levels including Cretaceous, Triassic and Palaeozoic ages.

The Khurbet East #1 discovery well was drilled to a total drilling depth of 3,800 meters and encountered several potential hydrocarbon bearing formations.

Well data from the Cretaceous aged Massive formation at 1,917 metres indicated a net hydrocarbon interval of approximately 22.5 metres. A wireline formation sampler which recovered oil samples to surface confirmed the presence of hydrocarbon in the Massive formation.

Data from the Triassic aged Butmah formation at 2,850 metres indicated a potential net hydrocarbon interval, as estimated by the Operator, of approximately 16 metres. A wireline formation sampler which retrieved a gas sample to surface confirmed the presence of hydrocarbon in the Butmah formation.

While drilling the Triassic aged Kurrachine Dolomite formation at 3,098 metres hydrocarbon shows were recorded over an interval of approximately 60 metres. The net hydrocarbon interval is uncertain as well-bore conditions resulted in inconclusive wireline logs over this section. During well testing operations, oil of approximately 35 degrees API gravity flowed to surface through a 32/64 inch choke at a rate of up to 478 barrels per day, with a gas-to-oil ratio averaging approximately 2,000 standard cubic feet per barrel.

The Khurbet East #2 appraisal well, located approximately 1.2 kilometres to the northeast of the Khurbet East #1 discovery well, was drilled to a total depth of 2,050 metres to appraise the Cretaceous Massive formation.

The Cretaceous Massive formation was encountered at 1,931 metres. Wireline logs indicated a gross hydrocarbon interval of 49 metres and a net hydrocarbon interval of 29 metres. No oil/water contact was seen on the logs and therefore the thickness of the oil interval may be greater than currently interpreted. Well testing operations were conducted over the upper 10 metres, approximately, of the Massive formation. During a 16 hour flow period, oil flowed to surface under natural flow through a 32/64 inch choke at an average rate of 710 barrels per day, increasing to a final rate of 820 barrels per day. The oil was of approximately 26 degrees API gravity with a gas-to-oil ratio of approximately 15 standard cubic feet per barrel. The results of the testing operation indicate very good formation permeability.

In August 2007, Emerald entered the first extension of the exploration period with duration of three years and a minimum work obligation of 250 square kilometres of 3D seismic and two exploration wells.

Further appraisal of the Khurbet East discovery continues with the acquisition of 160 square kilometres of 3D seismic over the structure. The results of this survey will be used to plan further well locations. Exploration of the block is also progressing with the acquisition of 240 square kilometres of 3D seismic over some leads seen to the some of Khurbet East.  

In January 2008 Khurbet East #3 was drilled to a total depth of 2,050 metres to further appraise the Massive formation. The full section of the main Massive reservoir was flow tested, under natural flow conditions, at a rate of 3,420 bopd.

Previous Exploration Results

Previous work during 2006 and early 2007 two exploration wells were drilled to test a Cretaceous prospect on the flank of the Souedieh field (Souedieh North prospect) and a deep Palaeozoic target underlying the Souedieh field (Tigris Prospect).

The Souedieh North #1 exploration well was drilled to 2,225 metres and evaluated during May 2006. While drilling the well a series of hydrocarbon gas shows were recorded and analysis of the electric wireline logs in the Tertiary and Cretaceous reservoir sections of the well indicate potential hydrocarbon zones. However, wireline conveyed sampling tools did not recover any hydrocarbon fluids. Preliminary analysis indicates that the hydrocarbon is low API gravity oil with a high viscosity and the low porosity and permeability reservoirs may produce fluid only after mechanical or chemical stimulation. The well has been suspended in order to determine if these reservoirs may be suitable for fracture stimulation, or whether the well should be deepened.

Tigris #1, the second exploration well in the block, was spudded in September 2006 targeting the Palaeozoic formation underlying the Souedieh oil field. The S1100 well drilled by SPC in 1994 penetrated several zones within the Tigris structure, some of which, when tested, produced gas to surface. The Tigris #1 well was drilled to a depth of 4,500 metres. Hydrocarbon shows were encountered while drilling, two cores were cut, and an extensive suite of wireline logs was run across the Palaeozoic section. On the basis of the data acquired in the well, Emerald concluded that although hydrocarbons may be present, it is unlikely that commercial hydrocarbons can be produced from this well.