Other Operating Areas
The North Sea
The North Sea is an oil-based portfolio in a strong Brent oil price environment. With 20 years of operating experience in the basin, Talisman has focused on operating late-life, mature fields. In recent years, we have not invested adequate capital in the UK, which has contributed to asset reliability challenges as well as reduced production capability.
Recognizing the need for additional capital and looking to reduce our exposure to inherent production volatility, Talisman sold a 49% working interest in our UK assets to Sinopec for $1.5 billion in late 2012.
This transaction enables increased investment by the joint venture in the UK North Sea, while allowing Talisman to reduce net spending. In 2013, investments will be made to improve operational efficiency in the UK and to execute economic redevelopment and life extension projects.
Redevelopment of the Montrose area - including facilities upgrades, development drilling, and the tie-back of undeveloped fields - accounts for approximately one-half of our UK North Sea spending this year. Investment will also be directed to infill drilling, water injection, platform, and subsea upgrades. We will also re-examine the possibility of developing the Auk South field.
In Norway, spending will be focused at Brage and Varg, including development drilling, field extensions, near-field exploration, and the Varg gas export project. In 2012, the Yme project experienced significant delays, quality issues and cost overruns. Given the uncertainty of the timing of first oil, Talisman removed Yme from its forward production projections and recorded impairment losses.
Talisman's overall capital spending in the region is expected to be about one-third less in 2013, after accounting for the joint venture. Our strategy across the North Sea is to optimize value through near-term opportunities, while driving safe, efficient, and reliable operations.
Kurdistan Region of Iraq
Talisman operates two blocks in the Kurdistan Region of Iraq: Kurdamir and Topkhana. Kurdistan is a world-class exploration opportunity in an under-explored basin. In 2012, we made a significant oil discovery in Kurdamir. Talisman's net 2C contingent resources in Kurdamir/Topkhana today are 114 mmbbls of liquids and 1.5 tcf of natural gas. Further appraisal drilling is targeted at proving the significant oil upside that exists. We currently estimate 329 mmbbls and 1.2 tcf of net unrisked prospective resource.
One of our key priorities this year is to recognize value in our portfolio. To do so, we will continue exploration and appraisal drilling to establish the extent of the resource base in Kurdistan. In 2013, we will drill two wells: Kurdamir-3 to evaluate the extent of the oil column, and a second well at Topkhana. Once these drilling programs are completed, we will consider all options to unlock value in this asset.
Talisman Energy Inc. is a global upstream oil and gas company, headquartered in Canada. Talisman has two core operating areas: the Americas (North America and Colombia) and Asia-Pacific. Talisman is committed to conducting business safely, in a socially and environmentally responsible manner, and is included in the Dow Jones Sustainability (North America) Index. Talisman is listed on the Toronto and New York stock exchanges under the symbol TLM. Please visit our website at (www.talisman-energy.com)
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