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The MOU, which is binding and is expected to lead to a definitive agreement upon receipt of further documentation, calls for Galizien to spend up to $5,000,000 in the first stage in connection with the drilling of the first 10 new coal bed methane wells on the East Ukrainian CBM Properties held by EuroGas Ukraine (a Ukrainian private company equally owned by EuroGas GmbH and OJSC NT Technologies of Kiev); reservoir and core evaluation; and completion of the wells in order to earn a 33 percent undivided working interest in the CBM Properties. Galizien and EuroGas will be mutually responsible together with EuroGas Ukraine for choosing all well locations in East Ukraine for all of the operations associated with the work program.
The work completion program will consist of the drilling of 10 new wells to the appropriate coal bed methane formations, of which a minimum of two well locations shall be selected to include coring, logging and respective laboratory rock evaluation work. The following completion program will consist of the application of Galizien's licensed proprietary enhanced oil recovery technology, known as SRS (short radius stimulation) hydra-jetting technology, including the application of Siloxane fluids (SRS Process), in connection with the completion of the wells. Galizien will be responsible for the operations associated with the drilling, completion and application of the SRS technology.
EuroGas CEO Wolfgang Rauball said, "Our partnership will Galizien and its COO, Dr. David Kahn, is expected to fast-track the development of our considerable CBM properties, starting with Eastern Ukraine. We will immediately begin reviewing our trove of technical data and start scouting well sites: we expect to begin drilling as early as fall 2010."
Dr. David Kahn commented on the partnership with EuroGas, "We are extremely excited to have become involved with EuroGas and OJSC NT Technologies in this prime, critical mass land package which has seen substantial historical production. Those companies have together done an extremely impressive job of putting together this major block of CBM claims."
Dr. Kahn added, "The concessions overlay a defined reservoir which we believe can be efficiently and effectively exploited, particularly with our suite of North American drilling and drilling re-completion technologies. We look very much forward to beginning work alongside our partners on the rehabilitation of some of the 2,000 formerly producing wells, adding new drilling, and moving rapidly towards production."
Regarding EuroGas and Total, Mr. Rauball said, "On a separate track, we continue to work closely with respect to our Western Ukrainian shale gas activities with Total E&P Activités Pétrolières (Total), a wholly owned subsidiary of Total S.A., one of the world's largest oil companies, with whom we have signed a previously announced confidentiality agreement in connection with the evaluation and possible acquisition by Total of certain rights held by EuroGas Polska's wholly owned West Ukrainian subsidiary in an onshore region in Western Ukraine, as well as the Bieszczady concession in Poland, in which EuroGas owns a 24 percent interest."
"The tremendous amount of press coverage on the potential that European shale gas has received in Poland and Ukraine is well merited," said Mr. Rauball, EuroGas. "While the shale gas revolution has vaulted the United States into first place among global gas producers, we believe that European shale gas has an even brighter future due to higher gas prices in Europe; reduced transportation costs resulting from shorter distances from the wellhead to end markets; greater accessibility to gas pipelines; a more mature geological rural landscape that might prove to be even more productive due to substantially thicker shale gas bearing formations than in the U.S.; and higher associated natural fracturing."

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