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Tethys Petroleum Ltd
Symbol C : TPL
Shares Issued 286,692,744
Close 2012-04-12 C$ 0.80
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Tethys ships first oil through Aral oil terminal

2012-04-12 03:09 ET - News Release

Dr. David Robson reports

TETHYS PETROLEUM LIMITED: FIRST OIL SALES THROUGH KAZAKH OIL TERMINAL

Tethys Petroleum Ltd. has completed the first shipment of commercial oil production through its Aral oil terminal at Shalkar -- a purpose-built oil storage and rail loading facility to connect the company's Doris oil field to the Kazakh rail system.

Highlights

AOT key points

  • Enable an initial doubling of production to approximately 4,000 barrels of oil per day;
  • Increase efficiency and reduce transportation costs, resulting in a higher realized oil price;
  • Phase 2 to provide additional capacity to further increase production to 5,000 to 6,000 barrels of oil per day in the second half of 2012.

AOT is owned and operated jointly through a 50:50 joint venture by Tethys and its Kazakh oil trading partner's company, Olisol Investment Ltd. It is located approximately 230 kilometres from the Doris oil field, significantly reducing the distance oil is currently trucked by road from the field. The opening of AOT will allow the company to initially double production to approximately 4,000 barrels of oil per day due to a halving of the road trucking distance.

Furthermore, whilst the current rail loading point at Emba experiences bottlenecks due to overuse by many different companies, AOT will be dedicated solely to Tethys oil sales.

In addition, a long-term contract has been signed with Kazakh railways to allocate up to 13,500 barrels per day of railcar capacity to AOT, giving significant flexibility for the future.

To date, over 13,000 barrels of oil have been tested from exploration and appraisal wells in and around the Doris accumulation, and it is believed that a sustainable production level of 5,000 to 6,000 barrels of oil per day can realistically be achieved from these wells. Once the phase 2 of AOT has been completed, plans will be implemented to increase production up to this level in the second half of 2012.

Production from future wells will be put through the terminal, including any production realized from the next appraisal/exploration well, AKD07, which is planned to spud this summer. The AKD07 well will be drilled to the southeast of the original AKD01 discovery well, targeting 3P reserves at the Cretaceous Aptian sand level in what is believed to be a channel sand system, whilst simultaneously targeting an exciting exploration prospect (named Dyna) that has been identified on the new seismic data from a bright amplitude anomaly at a slightly shallower level, which is interpreted to be part of a different, larger sand fan system. The prospective resource for this and other prospects will be disclosed after the completion of a new independent Kazakhstan resource report, which is expected in second quarter 2012.

The first phase (phase 1) of three planned phases of construction on the Aral oil terminal in 2012 is now complete.

Phase 1 -- completed

The phase 1 facility has a loading capacity of 4,200 barrels of oil per day and a storage capacity of 1,300 barrels. Under phase 1 operations, the terminal will have the ability to unload 10 road tankers and to simultaneously load five rail tankers.

Phase 2 -- estimated completion in second half of 2012

The phase 2 facility will have a loading capacity of 6,300 barrels of oil per day and a storage capacity of 12,580 barrels. Under phase 2 operations, the terminal will have the ability to unload 10 road tankers and to simultaneously load five rail tankers, but with the additional storage capacity increasing the terminal's throughput.

During phase 2 operations, the facility will become operational 24 hours a day. Further enhancements during phase 2 operations include oil and water metering systems and a heating capability for winter operations. All process equipment will be automated during phase 2 operations.

Phase 3

On completion of phase 3, the facility will have an estimated loading capacity of 12,000 barrels of oil per day and a storage capacity of 125,800 barrels of crude oil, plus an additional 12,580 barrels of storage for refined products. Under phase 3 operations, the terminal will have the ability to unload 10 road tankers and to simultaneously load 10 rail tankers.

The additional rail loading capacity under phase 3 operations will be achieved via the construction of a second rail loading rack, adjacent to the first. Under phase 3 operations, the facility will incorporate an electrical dehydrator for the commercial treatment of crude oil and will also have the ability to receive and store refined products (principally diesel and gasoline), which can be used to service the company's drilling operations or can be sold locally. In addition, it will be able to act as a shipment terminal for equipment to be moved to and from the Doris oil field and surrounding operations.

Dr. David Robson, chief executive officer and president of Tethys, said:

"The first shipment of Doris crude oil through the Aral oil terminal is a milestone event for the company enabling higher production levels, which will significantly transform the cash flow of the company. We look forward to further drilling success this year and to steadily increasing the throughput of the terminal.

"I would like to thank our staff and our partners for their hard work in extremely difficult weather conditions in completing the terminal and bringing on stream these higher production levels."

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