Tax break sees Kazakh production resume

ARAWAK HAS RESUMED oil production at its four operated fields in Kazakhstan. Arawak announced on December 5, 2008 that it had curtailed production at the fields following a significant deterioration in margins owing to high taxation and a material decline in world oil prices.

Procedures to restart production at the Akzhar, Besbolek, Karataikyz and Alimbai fields, which are each 100 per cent held and operated by Arawak, recommenced on January 18. The move followed the adoption of a new tax code in Kazakhstan, under which it is anticipated that the customs export duty (CED) will no longer be applicable to crude export sales provided that payments are made in compliance with the new tax regime.

Production at the four fields is expected to return to pre-curtailment levels of approximately 9,300 bpd in the coming weeks. Arawak undertook a programme of development drilling at the Akzhar and Besbolek fields in the fourth quarter of 2008 with ten new wells drilled and completed at Akzhar and six new wells at Besbolek. These additional wells will be phased into production as existing operations increase.

The company's nonoperated Saigak field, which is governed by a production sharing agreement and exempted from CED, has continued to produce normally throughout the period at approximately 1,100 bpd net to Arawak, which holds a 40 per cent participating interest in the field. In Russia, the continuous decline in world oil prices in the latter weeks of 2008 resulted in a collapse in the domestic market and a sharp reduction in Arawak's domestic sales. Exports from Russia continued as normal. Reduced local sales resulted in high inventories at the end of 2008 and consequently Arawak curtailed production at the beginning of 2009 as storage facilities became fully utilised.

However, domestic sales are now picking up, enabling Arawak to reduce inventory and increase production towards normal levels. Arawak's net production at the Sotchemyu- Talyu and North Irael fields is now approximately 4,430 bpd. "We were pleased with the results of our fourth quarter drilling campaign in Kazakhstan and now that the economic environment is once more viable for us to produce and export crude oil, we look forward to being able to demonstrate our full production capability at Akzhar and Besbolek," said Alastair McBain, Arawak's president and CEO.

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