Kazakhstan is located in Central Asia and is the ninth largest country in the world by land area. It is bordered by Russia to the north, China to the east and the Caspian Sea to the west. It is populated by approximately 15 million people. The country has a democratic political system and a market economy founded on a stable currency, the Tenge. It is widely recognized as being the most stable country in the CIS from an economic and political perspective. Kazakhstan’s sovereign debt rating is investment grade, Baa3 by Moody’s and BBB- by S&P, with a stable outlook, remaining the highest of any of the CIS countries, including Russia. Since 2000, its GDP growth has averaged over 10% per year, and in 2005 grew by 9.4%, bringing the GDP to over $40 billion, with a per capita GDP of $2,800. Kazakhstan has enacted western-style legislation on banking, securities regulation, taxes, land, accounting and natural resources. The country is rich in commercial minerals with world class reserves in chromium, vanadium, lead, iron, zinc and cadmium. It is also a significant producer of agricultural products such as wheat, cotton, rice and livestock products.

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The most significant asset of Kazakhstan is its oil and gas resources, which are a major driver of its economic growth. There are 250 discovered oil and gas fields within the borders of Kazakhstan. These oil and gas fields contain an estimated 40 billion barrels of recoverable oil based on recent discoveries. Of the CIS countries, Kazakhstan is second only to Russia in production and reserves. Its current production is approaching 1.3 million barrels of oil per day, with over 85% of that oil exported. Its goal is to increase production to over three million barrels of oil per day during the next decade. Reaching this goal is supported by the continued development of the oil and gas treatment and transportation infrastructure in the core oil producing regions of western Kazakhstan. This would move Kazakhstan into the ranks of the top 10 oil producing countries in the world.

Developing these assets and getting the product to market requires unique knowledge about the region, local laws and customs. The management team at Transmeridian has developed the knowledge and skill to operate successfully in the country.

Transmeridian's primary oil and gas property is the South Alibek Field, in which the company holds a 100% interest through its subsidiary CaspiNeftTME. At January 1, 2007, the net proved reserves estimated by Ryder Scott Company were 67.2 million barrels and the pre-tax net present value, discounted at 10%, was approximately $970 million. Significant reserves growth since inception has been a result of delineation and development drilling within the field since 2002. The accelerated development program implemented in 2006 is expected to continue the reserves growth. The Company signed a long-term Production Contract for the Field in December 2006.

  
 

In May 2000, Transmeridian acquired the license and Exploration Contract covering the South Alibek Field. The Field and the 14,000 acre license are located in a fairway of large producing fields in the prolific oil region of Aktobe in northwestern Kazakhstan. It is surrounded by giant producing fields including Kenkiyak, and Zhanazhol and is immediately adjacent to the geologically similar Alibekmola Field, from which it is separated by a large fault. The South Alibek Field is 10 miles north of the Zhanazhol field, operated by Aktobe Munaigas (CNPC) and approximately 125 miles south of the city of Aktobe. The Alibekmola Field has been in a development phase since 2001 and is now operated by KazOilAktobe (KazMunaiGas and LukOil). A 20-inch pipeline system now links the Alibekmola Field to Kazakhstan’s export pipeline network, including access to the Black Sea port of Novorossiysk via the CPC pipeline. South Alibek Field’s production processing and treating facilities are less than one mile from the access to this system. Several oil terminals within 30 miles from the Field provide for oil export sales via rail.

Since the initial South Alibek discovery well A-29 was drilled and tested by the Kazakh successors to the Soviet Ministry of Geology in the early 1990s, no further drilling activity occurred in the area until Transmeridian acquired the license and Exploration Contract in 2000. The Company’s first well, SA-1, which was completed in 2003, confirmed the presence of a potentially significant field and first production was established

Within the South Alibek Field, the KT1 and KT2 carbonate reservoirs are porous and fractured carbonates of shallow marine–terriginous origin. Porosity averages between 9-10% for both the KT1 and KT2, and is as high as 15% in the KT2 and 20% in the KT1 based on open porosity estimates from core samples. Permeability ranges between 5mD to an estimated 300mD. The identified net thickness of the oil bearing reservoir averages around 200 feet for both the KT1 and KT2. The KT2 carbonate is a series of massive stacked platform carbonates, subdivided into five stratigraphically defined zones. The top of the KT2 is at approximately 10,500 feet and is more than 3,000 feet in thickness. The shallower KT1 carbonate is subdivided into three zones, the lowest zone is a series of massive stacked platform carbonates and the shallower zones are interbedded carbonates and shales and claystones. The KT1 carbonate is at a depth of approximately 7,000 feet, and is around 2,300 feet in thickness. These are the main reservoirs from which many of the largest fields in the region are producing. To date, the Company has has established production in the KT2 carbonate reservoirs.

 

More information on the South Alibek Field operations is contained in the periodic operations updates filed under Investor Relations section of this website.