DNO ASA - Stock Exchange Notice 250906

DNO ASA (DNO.NO) is today announcing the following:
  • Status on testing of Bayoot SW # 2 in Yemen
  • Comments on DNO's contracts for oil exploration and production in Iraqi Kurdistan.
Testing Bayoot SW # 2, Block 53 in Yemen
Testing of the fractured basement in Bayoot SW # 2 resumed last week after installing a new Electrical Semi-submersible (ESP) pump (ref. Stock Exchange Notice of 18th September 2006). A maximum rate of approximately 1 400 barrels fluid per day was achieved, comprising a mix of drilling fluids, oil and gas. During the past few days the well has shown an increase in the oil fraction of the well flow, and a maximum gross oil flow rate of 700 barrels per day has been achieved. The well is currently shut in for pressure build up analysis. Thereafter the testing will continue to further clean-up the well flow.
Early transport of oil has also commenced by trucking to the Sharyoof central processing facilities some 10 km from the well, at daily gross volumes of ca. 200 - 250 BOPD. Contingent on the final test results, a pipeline and other facilities will be installed to connect the Bayoot oil production to the Sharyoof facilities on permanent basis.
As previously reported substantial mud losses occurred during drilling the basement interval. It is estimated that up to 8.000 barrels of drilling & completion fluid have been lost into the fractured basement interval. To date some 2 000 barrels of this fluid has been recovered trough back flowing. A full clean-up of the well flow is therefore assumed to take several additional days of testing.
The Bayoot structure is located on a very prospective basement trend between the Suna field in Block 14 some 14 km to the south east, and the Kahrir field in Block 10 some 15 km to the south west. The Suna and Kahrir fields have proven to be the most successful basement producing fields in Yemen to date.
The exploration well, Hekma # 1 is also currently being drilled some 5 km from Bayoot SW # 2.
DNO's contracts for oil exploration and production in Iraqi Kurdistan.
Once again there have been various quotes in the media which has caused speculations about the validity of DNO's Production Sharing Agreement's (PSA`s) signed with the Kurdistan Regional Government (KRG).
Iraqi oil minister Al-Shahristani have been quoted the following in Dow Jones Energy Services
Quote: "The (oil) ministry isn't committed to oil investment contracts signed in the past...by officials from the Kurdistan Regional Government which were announced as contracts to develop oil fields," End Quote.
DNO have been in contact with Dr. Ashti Hawrami, the Minister for Natural Resources with the KRG who today advised DNO  the following:
 The ministry in Baghdad has no authority to make statements like this, and the same ministry does not have to be committed to such contracts under the new constitution of Iraq.
Dr. Ashti Hawrami continued to say: There might have been misquotations, and for the avoidance of doubt KRG will make an official statement to clarify this issue in a few days.
Dr. Ashti Hawrami also referred to related questions and answers published on www.krg.org, 22 August 2006 under the title KRG Natural Resources Minister responds to comments on draft Kurdistan Petroleum Act.
In the Stock Exchange Notice released on 11th January  2006 DNO prepared two documents in order to clarify the position of DNO's  agreements with KRG.
- A Note containing an extract of the clauses in the new Constitution of Iraq which are relevant for the PSA`s.
- A Note with a list of questions and associated answers relating to issues that would further clarify the history and legal validity of the PSA`s.
These documents are available at DNO's web site www.dno.no.
Helge Eide, Managing Director of DNO comments:
"DNO remains committed to its obligations under the PSA contracts with KRG and will continue its exploration program and the work to deliver first oil production from the Tawke oil discovery during 1st Quarter 2007. "
25 September 2006
Helge Eide
Managing Director.               Telephone: (+47) 23 23 84 80