An agreement declared this week will enable Caspian Energy Inc. and a new partner to proceed immediately with plans to expand production in the East Zhagabulak oil field of Kazakhstan.

Caspian Energy Inc. said today that subsidiary Caspian Energy Ltd. (CEL) has arranged the sale of a 10-per-cent interest in Aral Petroleum Capital LLP (Aral), the operating entity in East Zhagabulak. Asia Sixth Energy Resources Limited is the purchaser of the 10-per-cent interest sold by Caspian and has also acquired the 50 per cent of Aral previously owned by Azden Management Limited.

As purchaser, Asia Sixth Energy has agreed to:

• Provide a loan ("Facility Agreement") of up to US$2 million to Aral to conduct immediate workovers on production wells in the East Zhagabulak field; and, • Seek a total US$80 million in debt financing (including the $2 million facility agreement) for Aral to conduct further development and exploration drilling.

"This arrangement is a transformational event that gives Caspian and its new partner in Aral Petroleum the cash reserves to realize on the potential of the East Zhagabulak field, as well as to explore other North Block prospects," said Caspian Chief Executive Officer William Ramsay. "Exploration is aimed at proving up reserves which the previous Soviet regime had always maintained were there.

"Caspian has been seeking a high-quality partner for some three years as part of our plan to unlock these resources and today's announcement is the culmination of a year's negotiations," Ramsay said. "We believe this agreement is in the best interests of the partners and their shareholders and will advance the date of steady-state commercial production from East Zhagabulak."

Partners plan to drill a series of development wells in East Zhagabulak, beginning with one well in the first quarter of 2011. If successful, this will be the third production well on the field, to date, with a further three wells to be drilled sequentially. The company believes that production thereafter will reach about 7,000 barrels of oil per day.

Tags: Caspian Energy Inc.