Heritage Oil surprises investors with major gas discovery in Iraq

Wednesday, Jan 26 2011 by
2
Heritage Oil surprises investors with major gas discovery in Iraq

Heritage Oil (LON:HOIL) , the FTSE 250 oil and gas group, surprised shareholders today with news that its Miran West-2 well in the Kurdistan region of Iraq had made a major gas discovery – possibly the largest in the country for 30 years. Heritage had been expecting the well to deliver an oil discovery, helping to firm up its estimates of contingent and prospective oil resources on its 75%-held Miran block to 1bn barrels of oil equivalent. As it is, the company has revised those figures down to 744m barrels. As a result, the Heritage Oil share price dropped by nearly 17% to 363.2p.

Heritage’s 1,000 sq km Miran block contains two large structures – Miran East and Miran West. Following completion of the deepening and testing of the Miran West-2 well, management estimates that the Miran West structure has P90-P50 gross in-place volumes of gas of between 6.8-9.1 trillion cubic feet (TCF) with 42-71m barrels of condensate and 53-75m barrels of oil. The well was initially designed as an appraisal well for the Cretaceous section and was later modified to assess the exploration potential of the deeper formations, eventually being drilled to a total depth of 4,426 metres. The well results have confirmed three additional pay zones within Lower Cretaceous and Jurassic formations, in addition to the pay zone identified in the Upper Cretaceous in the Miran West-1 well, which was drilled in 2009 and has been suspended as a future production well. The Miran West-2 well also now has been suspended as a future producer.

Tony Buckingham, the chief executive of Heritage, said: “The discovery of a major gas field of up to 12.3 TCF in-place with exceptional flow rates makes this one of the largest gas fields to be discovered in Iraq. This well has substantially de-risked the field so we have the confidence to accelerate the work programme on Miran. We are considering various development options including a tie-in to planned infrastructure that will achieve first production for both oil and gas in 2015. This discovery has the potential to generate substantial further value for our shareholders and benefit the people of Kurdistan and Iraq.”

Heritage said that results from drilling and initial indications from a 3D seismic programme indicated that there were pervasive fracture networks across the Miran structures. Future drilling plans will be…

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