Hassi Ba Hamou ("HBH")
The HBH Permit was awarded in April 2005 to Gulf Keystone during Algeria’s 6th International Bid Round. The HBH Permit initially covered an area of 18,830 square kilometres located in the Timimoun Basin / Allal High area of central Algeria which covered five Blocks (317b1, 322b3, 347b, 348, 349b) and contained the HBH gas field.
In August 2006, BG Group plc agreed to acquire 36.75% of the HBH Permit and assume the role of operator. Gulf Keystone’s interest then became 38.25%. Sonatrach, Algeria’s national oil company maintained a 25% interest.
In consideration, Gulf Keystone received $55 million in cash and a $30 million carry. A contingent deferred consideration of up to $20 million is also payable, dependent on the gas reserves at the time of the HBH gas field development approval. The $30 million carry on the work programme was used to fund the acquisition of 2,047 kilometres of 2D seismic and 533 square kilometres of 3D seismic, all of which was undertaken during 2007.
A six well program to appraise the HBH gas field (wells HBH-4, HBH-5 & HBH-6) and explore the HBH Permit (wells HBHN-1, RM-1 & FEG-1) commenced in December 2007 and was completed in January 2009
The first well in the programme, the HBH-4 appraisal well, spudded in December 2007 and was completed in January 2008 on schedule and to budget. A production test yielded a stabilised flow rate in line with expectations of 12,800 cubic metres per hour (10.8 mmscfg per day) and provided us with valuable information on the resource potential of the permit.
In June 2008, the RM-1 exploration well was successfully drilled on a separate prospect some 50 kilometres to the South East of the HBH gas field and became our first discovery on the HBH Permit. Gas shows during drilling and logging results indicated a 61 metre gas column in sands of Siegenian age. During a production test, the well flowed gas at a stabilised flow rate of 10,266 cubic metres per hour (8.7 mmscf per day).
The HBH-5 appraisal well was successfully completed in November 2008. The well penetrated the Devonian age gas reservoir as predicted by the Gulf Keystone technical team and proved the extension of the HBH gas field to the South East. During a production test a stabilised flow rate of 11,366 cubic metres per hour (9.5 mmscfg per day) was achieved.
The HBH-6 appraisal well, the sixth and final well of the first prospecting period on the HBH Permit, was completed in January 2009. The well penetrated the Devonian age gas reservoir as predicted by the Gulf Keystone technical team and during a production test a stabilised flow rate of 15,345 cubic metres per hour (12.97 mmscfg per day) was achieved. HBH-6 completed the work commitments during this first phase.
HBHN-1, the first exploration well, completed in April 2008, was drilled on an untested structure to the North of the HBH gas discovery. The FEG-1 exploration well, completed in September 2008, was drilled on an untested trap to the South West of the HBH gas discovery. Neither encountered commercial gas volumes and were plugged and abandoned.
The completion of the seismic acquisition and well program detailed above completed the Phase 1 work commitments. Following the success of exploration well RM-1 in June 2008, both Gulf Keystone and BG Group elected to enter Phase 2 of the HBH Permit. Entering Phase 2 required a 30% reduction in the HBH permit area to 12,833 square kilometres covering four blocks (317b1, part 347b, 348, 349b) along with a work commitment of 500 square kilometres 3D seismic, one exploration well and two appraisal wells. Phase 2 work commitments are required to be completed by September 2010.
With the success of appraisal drilling during 2008, planning for the development and commercialisation of the HBH gas field has now begun. Project approval and sanction is currently anticipated during 2010 and first gas in 2014. Development of the more recent RM discovery is dependent upon the results of further seismic and appraisal drilling during Phase 2 of the HBH Permit.
The Company intends to seek a buyer for its interest in the HBH Permit. Under the terms of the HBH Permit a sale of the Company's interest in the Permit is subject to approvals from the Algerian Government and/or Gulf Keystone's partners, Sonatrach and BG.
