Syria

The Group’s heritage and core assets are in the Syrian Arab Republic.  Gulfsands main interest is in Block 26, a World Class resource which is currently under Force Majeure as a result of UK sanctions.

Project Sawa

While in force majeure, Gulfsands continues to take steps to protect and preserve its rights in Syria. This involves ensuring ongoing compliance with the Block 26 PSC, sanction compliance and continued outreach to a range of stakeholders including international governments to maintain awareness of the Company’s rights.

We call this Project SAWA.

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Project Hope

Gulfsands is pioneering a Humanitarian and Economic Stimulus initiative whereby international energy companies would return to operations in northeast Syria, with allocated revenues from oil sales deposited in an internationally administered fund and disbursed to finance humanitarian, economic and security projects across the country – for the benefit of all Syrian people who can, and should, benefit from their country’s national resource endowment and build self-sustainability and resilience for the future.

We call this initiative Project HOPE.

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Re-entry Planning

When legal, political, security and sanctions circumstances allow, Gulfsands intends to return to operations in Block 26. To ensure preparedness for this return, we have undertaken extensive re-entry planning which would allow us to recommence operation in smooth and efficient manner. We have development plan ready to go that could increase production from Block 26 to over 100,000 boe per day.

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Syria – Block 26

Gulfsands is the operator of the Block 26 PSC and holds a 50% working interest in the Production Sharing Contract (“PSC”) along with Sinochem (50% working interest). The Group is not presently involved in any production or exploration activities on Block 26 as force majeure has been declared in respect of the contract following the introduction of UK sanctions against Syria.

The Group has ensured that it remains compliant with all applicable sanctions in relation to Syria and intends to return to production and exploration activities as soon as permitted.

Block 26 covers an area of 5,414 km² in north east Syria and the PSC grants rights to explore, develop and produce hydrocarbons from all depths outside the pre-existing fields within the area and from the deeper stratigraphic levels below the pre-existing discovered fields. The final exploration period of the PSC was set to expire in August 2012 when force majeure was declared in December 2011. It is anticipated that an extension in the exploration period can be negotiated with the Syrian authorities to at least replace that period of time which was remaining when force majeure was declared. Rights to the benefits of production from discovered fields last for a minimum of 25 years from the date of development approval with extension of a further 10 years thereafter available at the partners’ option.

Under the Group’s operatorship, two oil fields containing reservoirs of Cretaceous age have been discovered and developed within the PSC area, Khurbet East (2008) and Yousefieh (2010). During 2011 combined production from these fields reached a level of just under 25,000 barrels of oil per day (“bopd”) before the impact of UK sanctions resulted in the curtailing of production levels. In addition, two further oil and gas discoveries with reservoirs of Triassic age have been identified beneath the Cretaceous aged oil producing reservoir in the Khurbet East field and within the Kurrachine and Butmah Dolomite formations. Development approvals for these discoveries were granted in 2008 and 2011 respectively. A further oil discovery was made late in 2011 by Gulfsands in the Cretaceous aged reservoirs at the Al Khairat exploration well, this discovery awaits further evaluation and development work.

The operation of these fields during the production phase is undertaken by Dijla Petroleum Corporation (“DPC”), a joint operating company formed between Gulfsands, Sinochem and General Petroleum Corporation (“GPC”) for this purpose, to which staff of both Gulfsands and GPC had previously been seconded. Since the introduction of UK sanctions on 1 December 2011 and the subsequent declaration of force majeure under the PSC, Gulfsands has had no involvement with the operations of DPC, and Gulfsands staff seconded to DPC have been withdrawn, leaving DPC under the management of GPC secondees.

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