Zhibek Resources

Zhibek Resources Ltd (Kyrgyzstan)

Zhibek Resources is an oil and gas exploration and production company which has a 72% interest in the Tash Kumyr exploration licenses in the Kyrgyz Republic. Xtract has entered a farm-out agreement to fund a seismic and drilling program for 2008 - 2011. Xtract owns 25.0% of the issued share capital of Zhibek Resources.

In October 2008, Xtract and Santos International Holdings Pty Ltd ('Santos'), a subsidiary of Santos Ltd, Australia's second largest oil and gas company entered a farm-in agreement in relation to Xtract's wholly-owned subsidiary, Zhibek Resources Limited ('Zhibek'). Santos assumed operatorship and control of Zhibek.

Under the agreement, Santos is funding up to US$8.5 million of Zhibek's near-term exploration programme, which includes a 2D seismic programme over the Tash Kumyr and Pishkaran license areas in the Fergana basin area in the Kyrgyz Republic, to earn a 75% interest in Zhibek. The seismic acquisition programme commenced in November 2008 and was completed in February 2009. Zhibek has now dropped the Pishkaran license in order to focus on Tash Kumyr.

The seismic interpretation, which was conducted by Santos' technical team, identified a new prospect called Karagan, which is believed to be a fault controlled trap that sits between the producing Mailsai oil field nearby to the west and the Kysyl Alma gas and Mailsu oil fields to the east. Karagan is on trend and analogous to the Kyzyl Alma gas field, which has been producing gas and gas liquids from Jurassic sandstones since 1968.

In May 2010, Zhibek advised the approval had been received for the commencement of drilling an exploration well by late 2010 or early 2011 by the joint venture company CJSC KNG Hydrocarbons. It was subsequently decided to delay drilling until the outcome of the Krygyz Republic parliamentary election is better understood and for recent ethnic unrest in the area to settle down.

Karagan-1 is planned to target the same Jurassic sandstones that produce gas at Kyzyl Alma. There is also potential for hydrocarbons to accumulate at Karagan in overlying Cretaceous sandstones, which are well developed at Mailsai. Santos estimates that the Karagan prospective structure has a mean area of 12 square km and an anticipated productive pay thickness of 20m. The expected depth for the top of the Jurassic sandstone is approximately 2,600m.

The pre-drill mean estimate of the potential recoverable gas from a discovery at the Karagan prospect is 65 billion cubic feet (gross) (approximately 10.8 million barrels of oil equivalent). There is a local market for gas in the Kyrgyz Republic, which currently imports gas from Uzbekistan and other adjoining areas via an extensive regional pipeline network.

Xtract retains representation on the Board of Zhibek and will contribute up to US$1.5 million to Zhibek's funding in the latter stages of the current exploration programme and may contribute to Zhibek's future exploration and development programs.