Reserves and Resources

Reserves and Resources

Up until 2015, hydrocarbons related to the known discoveries of Yousefieh and Khurbet East were classified as Reserves. During 2015 these Reserves were reclassified to Contingent Resources as a result of the continuing UK Sanctions in Syria. The Company recognises that it cannot give a definite timeline for the resumption of the development of the discovered fields within Block 26 that was suspended following the declaration of Force Majeure in 2011. In such a circumstance the SPE PRMS Guidelines suggest that if the (re)commencement of development cannot be guaranteed to be within five years from the date of evaluation then the volumes of hydrocarbons should be classified as Contingent Resources rather than Reserves. The Company concluded in December 2015 that the uncertainty in any timeline over which UK Sanctions in Syria may be lifted required that the volumes of oil, gas and condensate previously reported as Syrian Reserves be reclassified by the Company as Contingent Resources.

Since 2015 this classification as Contingent Resources has continued, even though, as at 31 December 2023, the Board believes that UK Sanctions will be lifted well within five years (its base case assumption for the impairment review is three years).  The Board will continue to monitor all activity focused on resolving the situation in Syria and will reconsider the basis for reversing this reclassification in line with any future developments.

Over recent years, the Gulfsands team has undertaken significant internal technical work to review estimated resources as part of the preparation for its return to Syria when circumstances allow. During 2019 (”2019 CPR”), and again in 2023/24 (”2024 CPR”), independent consultants, Oilfield Production Consultants (“OPC”) were commissioned to review, audit and validate this work, and prepare a Competent Persons Report (“CPR”) for the Board. This exercise included a comprehensive review of the Block 26 exploration and production interests (Contingent Resources and Prospective Resources) in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resources Management System (“PRMS”) approved by the Society of Petroleum Engineers (“SPE”).

In estimating the Resources, it has been assumed that the period of time elapsed during which the Group has declared Force Majeure on its Block 26 development and production activities, will ultimately be added as an equivalent time period extension to the contractually specified Exploration Period and Production Concession Periods, though there can be no guarantee that this extension will be granted.

Contingent Resources

The 2024 CPR (with an effective date of 1 January 2024), incorporating previously un-analysed re-processed seismic collated prior to the declaration of Force Majeure, and recent production related data, has led to an increase in these estimates.  The 2024 CPR has concluded that Khurbet East (Massive, Butmah and Kurrachine Dolomite), Yousefieh (Massive) and Al Khairat (Massive) fields as at 1 January 2024 hold 2C Contingent Resources of 110.4 million boe (net to Gulfsands).

OPC believes that the vast majority of these 2C Contingent Resources will be reclassified as 2P Reserves upon the lifting of Force Majeure.

The results of the 2024 CPR represent a 50% increase in 2C resources compared to 73.5 million boe in the 2022 Annual Report (which was based on the 2019 CPR), as shown below:

Net Unrisked Contingent Resources (working interest basis) as at 1^st January 2024:

Please note, certain figures may not add up due to rounding.

Gas is converted to mmboe at the conversion factor 1 bcf = 0.1667 mmboe

Prospective Resources

As part of the 2019 CPR, OPC reviewed the portfolio of nine identified prospects within Block 26, and in doing so, validated them as Prospects under PRMS definitions and also estimated associated Prospective Resources, on a risked and un-risked, pre-royalty basis.  This work was rolled forward, updated and reconfirmed as of 1 January 2024, as part of the 2024 CPR, and is summarised below:

Net Unrisked Prospective Resources (working interest basis) as at 1^st January 2024

The following table is a summary of OPC’s estimate of the oil and gas Prospective Resources (Unrisked) attributable to Block 26 as of 1 January 2024. The figures are based on Gulfsands net 50% working interest ownership:

Net Risked Prospective Resources (working interest basis) as at 1^st January 2024

The following table is a summary of OPC’s estimate of the oil and gas Prospective Resources (Risked) attributable to Block 26 as of 1 January 2024. The figures are based on Gulfsands net 50% working interest ownership: