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Elk Petroleum Ltd (ASX:ELK) Update on Grieve Muddy CO2 Flood Project and Ash Creek

Update on Grieve Muddy CO2 Flood Project and Ash Creek
 
- Transportation agreement for CO2 implemented
- Acquisition of right of way for CO2 pipeline installation
- Ash Creek status
 
Grieve EOR Update
 
Elk Petroleum Ltd (ASX Code: ELK) is pleased to advise that ELK has executed an agreement with a subsidiary of Anadarko Petroleum Corporation for the transportation of CO2 to Elk’s 100% owned Grieve field. This is another important step in the development of ELK’s planned CO2 flood project to increase oil recovery from the Grieve oil field.
 
The agreement takes advantage of Anadarko’s existing CO2 pipeline to deliver the ExxonMobil contracted volume of CO2 for the enhanced oil recovery (EOR) project at Elk’s Grieve oil field.
 
The delivery point of the CO2 from ExxonMobil’s Shute Creek gas plant for the Grieve EOR project is at Bairoil which is the start of the Anadarko’s CO2 pipeline currently delivering CO2 to an EOR project at the Salt Creek oil field.
 
Elk Managing Director, Bob Cook said, “Rather than incur the cost of building a new CO2 pipeline parallel to the existing one, this agreement with Anadarko reduces early capital funding for the Grieve project and helps meet the project schedule.”
 
The Company has also acquired a pipeline and its easement, which allows for a short connecting pipeline from the existing CO2 pipeline to a new branch pipeline to carry the CO2 the final three miles to the Grieve field. The new CO2 pipeline will be run in a right of way (ROW) contained in the easement recently acquired by Elk.
 
The map (contained in the ASX announcement) highlights the section of existing pipeline (indicated in red) and the branch line (and new ROW) involved in the transportation of CO2 from ExxonMobil to the Grieve Field.
 
The schedule for the Environmental Assessment (EA) covering all aspects of the proposed CO2 EOR project for the Grieve Muddy reservoir was recently presented to the Bureau of Land Management (BLM) at its office in Lander, Wyoming. A program for gathering data for the EA was confirmed and once completed, is anticipated to lead to approval of the EA and the implementation of the project. The BLM approval of the project is currently on the critical path to achieve the first major milestone of injecting CO2 in the Grieve Muddy reservoir in the first half of 2012.
 
Concurrent with these positive developments for the Grieve EOR project, the sourcing of debt-equity funds or a joint venture for the project is progressing.
 
Ash Creek Status
 
Ash Creek has been producing oil since the Trusler #1 well was placed on production on 16 February 2011. Trusler #8 was placed on production on 18 February 2011. Both wells have been undergoing testing since commissioning. The production facilities have been commissioned and with the exception of some initial commissioning issues, have performed in accordance with preliminary assessments.
 
Oil recoveries from the two producing wells have not reflected the earlier reported oil cuts seen in the extended production test of Trusler #1 (August 2010) nor the reported swabbing results of Trusler #8 (October 2010). It is anticipated that rates will increase from the impact of Trusler #9 water injection; this can take at least three months to be reflected in improved oil production as seen in 1964 when water was last injected in Trusler #9 and increased production from Trusler #8. The production in the two Trusler wells will continue as currently configured while testing continues.
 
The first sale (237 barrels) of Ash Creek crude took place on 9 March 2011.
 
Surtek, a Colorado-based consulting engineering company specialising in enhanced oil recovery (EOR) technology, has been engaged to prepare a reservoir model of Ash Creek which will be matched against past production. It will then be used initially, to identify immediate re-entry opportunities to lift Ash Creek production. Longer term, it will be used for the forecasting and planning of an EOR project for increased oil recovery from the field using chemical flood technology. The laboratory work associated with the chemical flood study is expected to commence in April and will ultimately require fresh core material from a new Ash Creek well. The location of that well will be determined in part by the reservoir model and in part to provide a good representative core sample.
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