The Company, through its wholly owned subsidiary, North Caspian Petroleum Ltd, operates and owns a 50% interest in subsoil use rights for the exploration of hydrocarbons in an early stage project in Kazakhstan (“Alakol Licence Area” or “Kazakhstan Project”). The remaining 50% is owned by Remas Corporation LLP, a privately owned Kazakhstan company.
The Alakol Licence Area is located in eastern Kazakhstan and borders the western boundary of the People’s Republic of China. The main target reservoirs in the Alakol basin are carbonates or sandstones of Paleozoic age occurring at depths ranging between 1,600 and 3,500 metres. The Alakol basin is considered to be similar to the Junggar and Zaisan basins across the border in China which are both proven oil provinces.
During the 2013, the Company conducted in house geological study of the blocks and worked on a new geological model, in communication with third parties. The new geological model was to be used for re-evaluation of resources and an update of the exploration program.
In 2014 the Company planned to carry out a further seismic study in order to assist with targeting the reservoir-quality sands and selecting the locations of future exploration wells.
On 4 August 2014, the Company received a notification from the Ministry of Energy of the Republic of Kazakhstan (formerly the Ministry of Oil and Gas) ("ME") that its rights to the Alakol licence had been withdrawn by ME unilaterally. The Company did not accept this as being justified and filed a lawsuit against ME demanding that the licence be reinstated back to the Company. A first instance court hearing was held on 16 January 2015 to address our claim for the licence to be reinstated and was decided in our favour. It was also recommended by the court of first instance that the licence expiry date be extended to account for lost time since the date the licence was withdrawn. ME has appealed this decision, and recently won. Immediately following this appeal court decision, the Company submitted a cessation appeal against it on 28 April 2015 and an official ruling against this was issued on 10 June 2015. The Company maintains its position and is currently reviewing its strategy which includes an option to pursue the last remaining legal channel available. The Company has one year from 10 June 2015 to submit its appeal to the Supreme Court.