Sheer Awarded Iranian Masjed-I-Suleyman Contract

Sheer Energy and its partner the Naftgaran Engineering Services Company have been awarded a contract for the redevelopment of the Masjed-I-Suleyman oilfield in Iran. Sheer Energy (Cyprus) Limited is the operator of the project and holds a forty nine percent interest. The balance of the project, fifty one percent, is held by Naftgaran Engineering Services Company of Tehran.

The terms of the agreement provide for a revised investment of approximately 81 million U.S. Dollars over a period of four years, commencing immediately, to perform a detailed reservoir simulation study, recomplete six wells, drill two new vertical wells and eight horizontal wells, and construct processing and water re-injection facilities to handle the targeted production level of an incremental 20,000 barrels of oil per day. Repayment will be made from crude oil sales over the ensuing three years from project completion. Compensation for the investment will be based upon an agreed rate of return at the targeted production level, which will increase or decrease for production above or below the target over the payback period. The MIS field is the first oil pool discovered in the Middle East and was initially drilled in 1908.

The pool is one of several large oil fields producing from fractured carbonate rocks of the Asmari formation. The MIS field is approximately 30 km. long and 7 km. wide. Company estimates place the original oil in place at over 6 billion barrels, of which approximately 1.135 billion barrels have been produced to date. Average depth to the producing horizon is approximately 1,000 meters with current net oil pay thickness ranging from 60 to 90 meters. The oil gravity is 40 degrees API. Current production from the pool, operated by N.I.O.C, is approximately 4,500 barrels of oil per day. N.I.O.C.'s existing production does not form part of the Service Contract. Representatives of Sheer Energy (Cyprus) Limited stated that this is an exciting opportunity to apply leading technologies to achieve enhanced recoveries from a very substantial reservoir. Success in the project will have significant implications for a number of other similar reservoirs in Iran and will create job opportunities for the people living nearby.

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