January 14, 2011
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№ 11 (November 2010)

Tethys Petroleum Limited: Kazakhstan Oil Production Project Approved

Tethys Petroleum Limited (TSX: TPL) has received approval for the Doris oil pilot production project and also provided an update on its operations and forward drilling plans in Kazakhstan, the company reported today. TethysAralGaz ("TAG"), the company's wholly owned Kazakh subsidiary, has received State approval from The Ministry of Oil and Gas ("MOG") for the Pilot production project for the Doris oil discovery on the Akkulka field.

By Tethys Petroleum

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This approval grants the right for oil production on the Akkulka field during the exploration period and allows the company to install and operate production facilities for the planned 3,000-4,000 bopd production target planned for the second quarter of 2011. Currently TAG is producing under Test Production at a permitted level of 750 bopd. Once the pilot program is completed the relevant final reserve calculations will be submitted to The Ministry of Oil and Gas to receive a Production Contract that will allow for full field development and foreign or domestic sales. The company is expected to apply for a Production Contract after the appraisal program for the Doris Oil discovery is complete which is forecast for the end of 2011.

Both the 3D and 2D seismic acquisition programs on the Doris oil discovery and surrounding exploration area have now been completed and the first data has been interpreted. The next two wells to be drilled on the Doris oil discovery have been identified and it is planned to commence drilling the first in early February 2011 with an already contracted ZJ30 rig. As well as providing more detailed information on the discovery field the seismic program has identified several new exploration targets at various depths in the vicinity. McDaniel and Associates Consultants Limited ("McDaniel") have been engaged in discussions to produce a new resource report in order to provide shareholders with an independent view of what the company believes is an exciting exploration area. It is expected this report will be finished in the second quarter of 2011. The new reserve figures, also prepared by McDaniel for the Doris oil discovery will be released in March 2011.

The AKD03 (Dione) exploration well has been drilled to a depth of 3,975 metres and will now undergo a comprehensive testing program on up to eight separate zones that have been identified on logs. Testing can commence once approval has been granted by  Kazakhstan which is likely to take up to a month to obtain. A further potential hydrocarbon bearing sand was identified at the base of the well but due to challenging drilling conditions in this area it was decided to stop and test the zones already identified. Furthermore the 3D seismic that has recently been interpreted indicates that the deeper zones might be exploited better through a future sidetrack of AKD03 or potentially of well G6, where a similar sand was encountered. This will be decided after the AKD03 testing program is complete. The ZJ70 rig "Telesto" will now be moved from AKD03 to KBD01 (Kalypso) to continue drilling that well to TD and a testing rig will carry out the smaller program on AKD03.

Both the AKD02 appraisal well and the G6RE sidetrack well will now be tested with the application of radial drilling which is forecast to be at the end of the first quarter 2011. Radial drilling is a completion method whereby high-pressure air, water and acid create well completion bores up to 100 metres in length. After detailed technical analysis it has been decided that this method is preferred to the acid hydro-fracing originally planned. This technology has recently been tested successfully at the company's oil field in Uzbekistan.

The KBD01 well on the Kalypso prospect is currently at 300 metres where the 508mm casing has been set. The KBD01 well is the first deep exploration well to be drilled by the company on the Kul-Bas block, which also contains several other attractive prospects. The well is located approximately 50 km to the North-west of the Doris oil discovery and has a planned total depth of 4,000 metres, targeting potential reservoirs at several stratigraphic levels from the Cretaceous to the Permo-Carboniferous. It is expected that drilling will recommence once the Telesto rig is transported from AKD03 and then rigged up which should take approximately three weeks.

It is planned to source an additional rig capable for deeper drilling in addition to the Telesto rig in order to drill both the Daphne prospect located in the western part of the Akkulka Block and additional exploration targets that have been newly identified by the 3D seismic.
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