Tethys Petroleum Limited

Tethys Petroleum Limited

December 20, 2007 08:58 ET

Tethys Petroleum Limited: Operations Update

TORONTO, ONTARIO--(Marketwire - Dec. 20, 2007) - Following yesterday's announcement of first gas sales from the Kyzyloi Field in Kazakhstan, Tethys Petroleum Limited ("Tethys")(TSX:TPL) today provided an update of current operations and future plans ahead of today's information briefing which is to be held at 10:00 am EST at 100 King Street West, 37th Floor, Toronto, Ontario, M5V 1K4 and will be accessible at www.vcall.com/IC/CEPage.asp?ID=124324.

On the company's shallow gas exploration program in Kazakhstan Tethys have already discovered significant additional gas in the Akkulka exploration area surrounding the now producing Kyzyloi gas Field, having flow tested over 40 MMcf (1,130 Mcm) of gas per day from seven successful shallow gas exploration wells drilled in the area to date, in addition to the gas tested from the Kyzyloi Field. Phase 2 of the Greater Kyzyloi development is designed to incorporate these discoveries into the development increasing commercial production to over 44 MMcf (1,200 Mcm) per day of gas in Q4 2008 by the installation of additional compression and tie-in of these wells to the Kyzyloi pipeline system. Contract negotiations are almost complete for the supply of the additional compressors to be installed at the compressor station. Work is underway on the detailed engineering for this plan which will be finalised based on data from the Kyzyloi Field production history and the results of the AKK13 exploration well which is currently drilling ahead towards its target in the Central Akkulka area. Results from the AKK13 well should be available early in the New Year, and AKK13 is planned to be followed by a further exploration well in the Central Akkulka area (AKK14) on a separate prospect located east of AKK13 with shallow gas targets at two stratigraphic levels.

Any additional gas volumes from these Akkulka discoveries are not covered by the limited long-term gas sales contract relating to the Kyzyloi Field, and over the past two years regional gas prices have increased significantly since that contract was negotiated. In addition further price increases have been recently announced with Turkmenistan fixing a price of US$3.68 per Mcf (US$130 per Mcm) increasing to US$4.25($150 per Mcm) for gas exports during 2008, representing a 50% increase over the current price, most of which comes through Kazakhstan.

Analysis of drilling and seismic data over the Akkulka and Kul-Bas areas in Kazakhstan has identified a number of deep targets which have the potential for substantial oil and gas in Triassic and Jurassic sequences on the flanks of buried structural highs. Independent analysis carried out for the Tethys IPO earlier this year estimated the un-risked exploration potential for some 744 million barrel oil equivalent (MMBOE) in these prospects. Additional seismic and data acquired last summer have firmed up this play, and also highlighted the potential of the structural high for additional resources. Tethys have been investigating the possibility of re-entering previously drilled wells which did not reach the target, and which might be sidetracked to test these deeper plays. The first of these re-entry's, on the Akkulka G-6 well, is currently proceeding, with a new wellhead being installed prior to pressure testing of the casing and well integrity. This work will be followed by an offset vertical seismic profile (VSP) to firm up the target location for any sidetrack. If it is possible to re-use these wells significant cost and time savings would be possible. Drilling is planned to commence at the end of May 2008 using Tethys' recently ordered ZJ70/4500L 2,000 hp deep drilling rig, the construction of which should be completed by April 2008.

In Tajikistan work has commenced on the rehabilitation of the first two wells on the Beshtentak oilfield under the terms of the recently signed Investment Operating Agreement (IOA). Because of the lack of appropriate available oilfield equipment in the country, work is currently underway to source and transport such equipment to the Tajikistan operating area. Meanwhile negotiations continue with the Government and Parlimentary Committees on the finalisation of the planned Production Sharing Agreement (PSA) for the Kulob Area of Southern Tajikistan.

Tethys is focused on oil and gas exploration and production activities in Central Asia with activities currently in the Republic of Kazakhstan and more recently the Republic of Tajikistan. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.

This press release contains "forward-looking information" which may include, but is not limited to, statements with respect to our operations. Such forward looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, the risks and uncertainties outlined under the section titles "Risk Factors and Uncertainties" in our prospectus (available at www.sedar.com). Should one or more of these risks materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. Additional information in respect of the Kyzyloi shallow gas field and Akkulka area (also referred to as the Akkulka Block), including location, area, geologic age and lithology, depth, estimated costs and gas marketing information, appears in Tethys' prospectus dated June 18, 2007. Barrels of oil equivalent ("BOEs") may be misleading, particularly if used in isolation. A BOE conversion ratio of 6,000 cubic feet of gas to 1 barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Tethys Petroleum Limited is registered in Guernsey, Channel Islands with registered number 41075 and is listed on the Toronto Stock Exchange (TSX) with the symbol "TPL".

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