Gulf Keystone Abandons the Testing of GRJ 2 well

Gulf Keystone Abandons the Testing of GRJ-2 Well

Gulf Keystone Petroleum Ltd 05-17-2007

Gulf Keystone Petroleum Limited has abandoned the testing of well GRJ-2, which is located on Block 126a in Algeria.

Well GRJ-2 was drilled by Gulf Keystone in late-2005. The well encountered encouraging hydrocarbon shows in Cenomanian / Turonian carbonates--the same reservoir interval that is currently producing in the GKN-1 well. Moreover, both core and image log data acquired over these prospective reservoir intervals indicated both the presence of fractures and hydrocarbons. The well was not tested at the time of drilling due to the lack of availability of suitable test equipment within Algeria.

During recent operations, Gulf Keystone perforated two potential reservoir zones over the two intervals: 2291.5 -2337 m and 2221-2276.5 m measured depth. Over each interval the Company performed an injectivity and step rate test followed by matrix acidization (mini frac). The aim of the test program was to connect the fracture and / or the matrix permeability in the surrounding reservoir and thereby access moveable hydrocarbons.

Although operations were performed successfully, no hydrocarbons flowed into the wellbore under test. The well is therefore presently being plugged and abandoned.

"We are disappointed that we were not able to establish connectivity with moveable hydrocarbons in this well," said Todd Kozel, CEO of Gulf Keystone. "It is unlikely that we will conduct any further operations on the GRJ structure. However, we will, as part of our overall technical appraisal of the northern blocks, review all geological, geophysical and engineering data collected during this operation to establish the likely reasons for the lack of commercial flow from this particular well."

Equities in Block 126a are:

Gulf Keystone Petroleum LTD., 60% (Operator)
Sonatrach, 40%