OREANDA-NEWS. February 22, 2011. OGX announced today the accomplishment of an important step necessary for initial production. The company concluded the drilling of the horizontal well 9-OGX-26HP-RJS (Waimea Horizontal) and, through a drill-stem test (DST), has identified excellent production index (PI) of 100m?/day/kgf/cm?, similar to results obtained in the best wells in the country. Currently, the well is being equipped to perform an extended well test (EWT) which is expected to register oil flowrate of up to 20,000 barrels per day, and a higher flow rate during its definitive development phase. This result surpassed initial expectations related to the Waimea accumulation and provides a solid foundation for the initiation of OGX’s production phase. This well is located in the BM-C-41 block in the Campos basin and will be connected to the FPSO (Floating Production Storage & Offloading) OSX-1 during the EWT, which will begin in the middle of 2011.

“The result obtained in the drilling of this well represents a milestone in the Company’s history. The use of horizontal drilling technology in the well confirmed very high production indexes in the carbonate reservoirs in the southern Campos basin, proving that we do have, in fact, before us an extraordinary petrolific province,” commented Paulo Mendonca, General Director of OGX. “This is one of the best production tests I have ever seen in my life”, added Mr. Mendonca.

The drilling of the horizontal well 9-OGX-26HP-RJS utilized state-of-the-art technology. OGX’s technical team was responsible for implementing an approach which called for the drilling of a directional well to a depth of 3,746 meters in order to enable a horizontal entrance into the targeted reservoir. The successful execution of this approach resulted in a well with more than 1,000 meters of horizontal extension in the carbonate reservoirs of the Albian section of the Waimea accumulation, which was originally discovered through the drilling of the 1-OGX-3-RJS well on December 18, 2009.

Following the conclusion of the drilling process, a drill-stem test was performed, which confirmed production potential of 40,000 barrels per day of oil with gravity of approximately 20°API. A complex process of selective acidification was used in eight well intervals, permitting better stimulation of the more than 1,000 meters of the well’s extension, thereby maximizing the oil flow.

In addition to the results, further information was collected, such as features of the reservoir rock and of the fluids, which will be analyzed by OGX’s technical team in the coming months. These interpretations, along with the information from the EWT will permit a better understanding of the accumulation and will assist in the preparation of the development plan.

Production model

OGX remains confident in how it has conducted the evaluation plan for the Waimea accumulation, with the next step being the execution of an extended well test (EWT), through which production will be initiated. The plan for this first project employs proven technology widely used in the petroleum industry and anticipates the use of wet christmas trees and flexible lines that will be linked directly to the FPSO OSX-1. This well will be equipped for production through use of the electrical submersible pump (ESP).

All equipment necessary for this phase of production has already been contracted with well-known global suppliers and a significant portion of it has already been delivered. The wet christmas tree which will be used in the EWT has already arrived at OGX’s port base, Briclog, in the Caju port (RJ). This piece of equipment was manufactured by GE Oil & Gas and was the first to be procured by a private Brazilian company. Four additional wet christmas trees will be delivered by GE Oil & Gas in the coming months, with some of them having been produced in Brazil.

The flexible lines for the connection of this first well to the FPSO OSX-1 are already being produced by Wellstream in its Niteroi (RJ) plant, and the control umbilical is being built by by Oceaneering, also in Niteroi.  This equipment is expected to be delivered to OGX in March 2011.

The equipment comprising the Electric Submersible Pump has already been tested at the Baker Hughes Plant in Claremore, Oklahoma, USA, and has already been delivered to Baker Hughes Brazilian base of operations in Macae (RJ).

Another important large scale resource contracted for use in the EWT is the newly built vessel by Aker, the Aker Wayfarer, which was contracted to Wellstream. This vessel will be responsible for connecting the producing well to OSX-1, as well as for installation of the mooring system of the FPSO.

The production unit FPSO OSX-1 is currently located in Singapore, and is undergoing the adaptation of its processing plant to make it suitable to process oil with the characteristics found in Waimea.

Commercialization

With the commencement of oil production, OGX has started structuring its oil commercialization division. The team already has two members with over 30 years of experience in the international oil trade. These specialists are in contact with potential clients in order to negotiate the sale of OGX’s initial production.