Tajik drillers, KOM200 well, Tajikistan
The primary strategy of Tethys Petroleum in Tajikistan is to undertake a comprehensive geological and geophysical data gathering exercise with the intention of locating and drilling the first deep exploration well below the regional salt layer, the so called “pre-salt” area. It is intended this deep well will target very large prospective resources. These prospects have never been drilled before in Tajikistan but are prolific producers from the same reservoirs in the adjacent countries of Uzbekistan and Turkmenistan.

Key Points:

• Gross unrisked mean recoverable prospective resources of 27.5 billion barrels of oil equivalent (BOE), consisting of:
  • Gross unrisked mean recoverable prospective resources of 114 trillion cubic feet (TCF) of gas
  • Gross unrisked mean recoverable prospective resources of 8.5 billion barrels (Bbbls) of oil and condensate
• Upgrade due to seismic data, gravity data acquisition and interpretation and well data

The resource report was prepared by Gustavson Associates of the United States and has been prepared in accordance with the reporting requirements of NI 51-101 adopted by Canadian securities regulatory authorities.

Continued drilling and seismic campaign

The final stage of the seismic programme in Tajikistan will commence this summer with equipment having been mobilized and initial interpreted results expected in Q4 2012. Once complete, this interpreted seismic will help identify the location of the first deep well to be drilled by Tethys.

The initial analysis of the data from the aerial graviometry survey completed at the end of 2011 revealed several attractive prospective areas with the potential presence of very large deep sub-salt and sub-thrust prospects within the Bokhtar Production Sharing Contract (PSC) Area. The additional seismic about to be acquired will target these areas and provide the final data in a comprehensive programme to optimally locate a deep well.

This final stage of the seismic programme will involve the acquisition of new seismic in two areas; the Vaksh valley and the Dushanbe Step. The programme has been designed to target these areas as the graviometry survey and other data have identified them to be the most likely to contain large deep prospects including potential Jurassic reefs located on the edge of likely Permian basement high features. Jurassic reefs form some of the most prolific fields in the Amu Darya basin (of which the Bokhtar PSC area forms part) and no wells have ever been drilled through the overlying salt layer in Tajikistan to date. This basin is extremely prolific containing oil, gas and condensate fields and indeed some of the world’s largest gas fields are located in this basin. These data also reveal significant potential in other parts of the PSC Area, including the Kulob area, however it has been decided to focus on the Vaksh valley and the Dushanbe Step initially.

It is expected that this new seismic programme will further confirm the high potential in the Tethys PSC acreage. Tethys now owns an 85% interest in the Bokhtar PSC following the recent acquisition of an additional 34% interest from its partner in the project.

Background: Strategy in Tajikistan

The primary strategy in Tajikistan is to complete a comprehensive geological and geophysical data gathering exercise with the intention of locating and drilling the first deep exploration well below the regional salt layer. This deep well will target very large prospective resources, as set out in the independent resource report. These prospects have never been drilled before in Tajikistan but are prolific producers from similar reservoirs in the adjacent countries including Turkmenistan.

This programme is firmly on track and consists of the following:

• In 2008, Tethys obtained and analysed the State geophysical information and well data of the shallower drilling that had been undertaken in the Soviet period and compiled an extensive database, which was combined with a regional geological model built in-house.
• In 2009-10, Tethys designed and acquired a regional seismic programme whereby approximately 700km of good quality seismic was obtained and interpreted.
• In 2011, Tethys carried out an aeromagnetic graviometry survey over more than half of the PSC Area. These data complement the acquired seismic data, State geophysical information and well data.
• In 2012, following on from the results of the aeromagnetic graviometry survey, a seismic contractor has been appointed and equipment mobilized to commence acquisition of focused seismic data over key prospective areas with the intention of identifying the location for the first deep well. It is planned that Tethys’ large ZJ70 drilling rig Telesto will be mobilized to Tajikistan by year’s end with the intention of drilling the deep well in 2013.

Tethys also continues to exploit the shallow potential in Tajikistan with oil production from Beshtentak, deepening of the Persea exploration well and plans for further evaluation of the East Olimtoi oil discovery.

Dr David Robson, Chairman, President and Chief Executive Officer of Tethys, added:

This hugely significant increase in our estimated resources in Tajikistan transforms our prospective resource base. I believe that these unrisked mean prospective resources are significantly greater than the estimated remaining reserves and unrisked resources in the UK North Sea⁽¹⁾. Geological and geophysical work undertaken has shown that Tethys is operating in a world class basin with enormous and untapped potential.

The deep prospects being pursued in Tajikistan have super-giant potential and any exploration success will be transformational for the Company. These additional seismic data will help to identify the location of the first deep, sub-salt well drilled in Tajikistan targeting extremely large prospective resources.

The references in this press release to prospective resources means those quantities of petroleum estimated, as of June 30^th 2012, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of these resources.

The resources estimates contained or referred to are estimates only and are not meant to provide a determination as to the volume or value of hydrocarbons attributable to the Company’s properties. There are numerous uncertainties inherent in estimating quantities of resources and cash flows that may be derived, including many factors that are beyond the control of the Company. The following is a non-exhaustive list of factors which may have a significant impact on the above estimates of prospective resources: despite the classification that they are as yet undiscovered but may be potentially recoverable the Company may be unable to carry out the development or their potential recovery; the activity may not be economically viable; the Company may not have sufficient capital or time to develop them; there may be no market or transportation routes for the production; legal, contractual, environmental and governmental concerns might not allow for the recovery being undertaken; reservoir characteristics might prevent recovery. The recovery of the resources is subject to the following risks and uncertainties: market fluctuations, the proximity and capacity of oil and gas pipelines and processing equipment, government regulation, political issues, export issues, competing suppliers, operational issues (exploration, production, pricing, marketing and transportation), extensive controls and regulations imposed by various levels of government, lack of capital or income, the ability to drill productive wells at acceptable costs, the uncertainty of drilling operations, factors such as delays, accidents, adverse weather conditions, and the availability of drilling rigs and the delivery of equipment.

Additional information prescribed by NI 51-101 appears in a material change report to be filed, and which will be available, on www.sedar.com.

¹ Economic Report 2012, the United Kingdom Offshore Oil and Gas Industry Association available online at www.oilandgasuk.co.uk