Lundin discovers oil in Caspian Sea

Lundin Petroleum AB's Morskaya-1 exploration well, in the northern Caspian Sea Lagansky block, has encountered a major oil accumulation in the Aptian and Neocomian sandstone reservoirs, the company says.

Offshore staff

STOCKHOLM, Sweden -- Lundin Petroleum AB's Morskaya-1 exploration well, in the northern Caspian Sea Lagansky block, has encountered a major oil accumulation in the Aptian and Neocomian sandstone reservoirs, the company says. Minor amounts of gas were encountered in the overlying Albian reservoir.

Morskaya-1 has been drilled to 2,082 m (6,831 ft) in less than 2 m (6.6 ft) of water. A significant amount of cores, wireline logs, and reservoir fluid samples have been acquired. Two of the hydrocarbon bearing reservoirs are scheduled for testing.

The Morskaya structure, which straddles the license boundary of the Lagansky block and the adjoining acreage controlled by the Caspian Oil Consortium, is on trend with several major oil and gas discoveries made by Lukoil in the Russian sector of the Caspian.

Following the testing of the Morskaya-1 well, the Marine Drilling Complex will be transported to the Laganskaya-1 well location, with drilling expected to start at the end of September.

Lundin Petroleum plans to drill another two wells in 2009. Petrovskaya-1 will target an anticline to the northwest and on trend with the Morskaya discovery. The second well will most likely appraise the Morskaya discovery, Lundin says.

"It is clearly positive that the discovery is predominantly oil but based upon the data acquired it appears that the size of the discovery will be below pre-drill estimates," says Ashley Heppenstall, Lundin CEO and president. "Further appraisal drilling will be needed to assess the full extent of the hydrocarbon reservoirs across such a large structure."

Lundin Petroleum currently has 70% interest in the Lagansky block. Gazprom has a call option to acquire a 50% plus one share. Lundin Petroleum has a call option to acquire an additional 30% from minority shareholders. If both options are exercised, Lundin Petroleum will retain 50% minus one share and Gazprom will hold a 50% plus one share.

07/14/2008

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