Khurbet East Oil Field Production Exceeds 11,500 Barrels per day

Khurbet East Oil Field Production Exceeds 11,500 Barrels per day

Gulfsands Petroleum plc, the oil and gas production, exploration and development company with activities in Syria, Iraq, and USA, announced that stabilized oil production through the Khurbet East Early Production Facility (“EPF”) now exceeds 11,500 barrels of 25.7 degree API oil per day (bopd), with production from three vertical and two horizontal wells.

Oil production through Khurbet East EPF commenced 21st July 2008 with initial production from the KHE-4 vertical well. Additional wells were successively brought online, and daily average production through the month of August was approximately 5600 bopd. Upon completion of the production startup phase on 5th September, all five wells are online and daily production was increased to in excess of 11,500 bopd with only trace amounts of water.

Total field production to date has been in excess of 260,000 barrels of oil with the oil being transported by truck approximately 33 kilometers from the EPF to a processing facility operated by the Syrian Petroleum Company (“SPC”). Sufficient trucking capacity had been pre-arranged in order to transport these daily volumes.

Under oil marketing arrangements reached with SPC and the Oil Marketing Bureau (“OMB”) of the Syrian Government, oil produced from the Khurbet East Field will be sold as “Syrian heavy crude oil” which has an API of approximately 24.1, into the OMB’s well established markets and exported through the Mediterranean port of Tartous using SPC’s oil handling infrastructure.

During the first 12 months of production, and in keeping with the oil marketing arrangements for oil produced from newly developed fields and other producing fields within the region using the same SPC oil handling infrastructure, the OMB has agreed to make an initial payment equal to 80% of the value of the invoiced deliveries which value will be calculated by reference to the official price of “Syrian heavy crude oil” with the balance 20% of the invoiced amount being retained pending completion of an independent analysis of the specification of the oil delivered during this period. This independent analysis will be carried out in September 2009 at which time and subject to such adjustments as may be required for variations in oil quality, the OMB will then pay all outstanding invoice retentions. After completion of this analysis, OMB will pay 100% of all monthly invoiced deliveries within 21 days of receiving invoices.

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