Current Projects

• Summary of Oil & Gas Exploration Interests
• General Information on Australian Offshore Permits
• General Information on New Zealand Offshore Permits
• Background and Details of Permit Interests
• Carnarvon and Browse Basins
• Southern Bonaparte Basin
• Bass Basin Royalty
• Taranaki Basin

The Octanex Group holds working interests in 14 Australian petroleum exploration permits and residual and royalty interests in a further three such permits, all situated in the offshore basins of Western Australia. The permits are on the Greater North West Shelf and they are located in regions of moderate to intense exploration activity. A royalty right is held in the Bass Basin permit T/18P, offshore Tasmania.

The Octanex Group also holds working interests in three permits in the offshore Taranaki Basin of New Zealand, a region of intense exploration activity. An application has been lodged for a further permit in the basin that is situated between the permits already held.

References in this section to the Octanex Group are references to Octanex and its wholly-owned subsidiary companies. The policy underlying the management of the Octanex Group permits, investments and related interests is a cohesive policy which, insofar as is practical and both legally and commercially expedient, does not differentiate between whether they are owned by Octanex directly, or indirectly through one or more of its subsidiaries.

The following is a location map of the portfolio of permit interests held by the Octanex Group.

The information provided in relation to each of the permits where the Octanex Group holds a working or residual/royalty interest covers:

• the Participants in each permit and relevant Joint Venture and their respective interests;
• the background to each permit (including its location and lead and prospect maps where relevant); and
• the remaining work programme obligations for the current term of each permit.

SUMMARY OF OIL AND GAS EXPLORATION INTERESTS

GENERAL INFORMATION ON AUSTRALIAN OFFSHORE PERMITS

Australian petroleum exploration permits are initially issued for six years.  Under the terms of each permit, the exploration work obligations nominated for the first three years must be met.  The permit holder may withdraw from the permit at the end of the third permit year, or at the end of any subsequent permit year, provided all the exploration work obligations up to the date of withdrawal have been met.

An individual permit year may be extended beyond 12 months if circumstances arise where the relevant work obligation for that year cannot be met in time.  In such circumstances, the final expiry date of the permit may also be extended, normally by the same period of time.

Provided all work obligations are carried out during the initial term of a permit, it may be renewed for a further 5-year term upon relinquishment of 50% of the original permit area.  This renewal is again available to the permit holder at the end of the first 5-year renewed permit term, with the same requirement to relinquish 50% of the already reduced area.  Any Retention Lease or Production License that is granted in relation to a discovery within a permit is excluded from the calculation of the relinquishment areas.  Therefore, subject to the prescribed requirements, a permit can have a potential 16-year life, or longer if one or more individual permit years has been extended.

GENERAL INFORMATION ON NEW ZEALAND OFFSHORE PERMITS

New Zealand petroleum exploration permits are initially issued for five years.  Under the terms of each permit, the exploration work obligations nominated for each permit period (which may be a year or a longer period) must be met or the permit surrendered in whole or in part.  The permit holder may withdraw from the permit at the end of any permit period, provided all the exploration work obligations up to the date of withdrawal have been met.

An individual permit period may be extended if circumstances arise where the relevant work obligation for that period cannot be met in time.  In such circumstances, the final expiry date of the permit may also be extended, normally by the same period of time.

Provided all work obligations are carried out during the initial term of a permit, it may be renewed for a further 5-year term upon relinquishment of 50% of the original permit area.  Any Production Licence that is granted in relation to a discovery within a permit is excluded from the calculation of the relinquishment area.  Therefore, subject to the prescribed requirements, a permit can have a potential 10-year life, or longer if one or more individual permit period/year has been extended.

BACKGROUND AND DETAILS OF THE PERMIT INTERESTS

CARNARVON AND BROWSE BASIN INTERESTS

The Octanex Group holds interests in six petroleum exploration permits and residual and royalty interests in a further three such permits in the offshore Carnarvon Basin. The six permits are WA-323-P, WA-330-P, WA-362-P, WA-363-P, WA-386-P and WA-387-P and the three with residual and royalty interests are WA-384-P, WA-385-P and WA-394-P. An interest is also held in the Browse Basin permit WA-342-P. Each of these 10 permits is displayed in the location map that follows the relevant commentary below.

WA-323-P & WA-330-P – DAMPIER SUB-BASIN – OFFSHORE WESTERN AUSTRALIA

Background:
Following a farmout of 75% of the then 100% interest held in these permits (as detailed below), the Octanex Group now holds a 25% interest in both of them. The Operator of the permits and of the Dampier Joint Venture is Santos Offshore Pty Ltd (Santos), a subsidiary of Santos Limited (ASX code STO).

The Dampier Joint Venture members are:

The initial 6-year term of both permits expired on 21 December 2010 and renewals for their first 5-year terms have been granted by the Designated Authority - the renewal terms commenced on 6 April 2011. The renewed permits are unchanged in area and each comprises four graticular blocks (approximately 646 km² or 159,630 acres in total) located in the Dampier Sub-basin part of the Carnarvon Basin, offshore Western Australia Maps.

In June 2011, Octanex announced the completion of a farmin agreement with Santos with respect to each of the WA-323-P and WA-330-P permits. As a consequence, the Octanex Group assigned a 75% interest and the operatorship in both permits and in the Dampier Joint Venture to Santos and Santos agreed to:

• conduct a new 3D seismic survey across both permits; and
• drill one well in the first three years of the renewed term of WA-323-P.

The Octanex Group will be free carried in respect of a 25% interest through the 3D seismic survey, the first well and all other exploration costs for the two permits, except any follow up wells drilled in either permit. Also, Santos reimbursed Octanex for the costs of prior seismic and associated expenditure in the two permits.

When announcing its farmin, Santos described the main identified feature in the permits, the Winchester Prospect Maps, as a large, attractive prospect in shallow water which has a geological setting similar to the recent Zola gas discovery. Santos noted that Winchester is well located for a variety of development options that presented a significant growth opportunity for Santos in Western Australia. Santos also announced that planning was underway for a 3D seismic survey to be acquired within the permits later in 2011.

Under the arrangements with Octanex, Santos has three years in which to drill a well, but their interpretation of Winchester as a robust prospect means consideration is being given to bringing that timing forward, possibly to the end of 2012.

The general region is proven for the formation, location and production of both oil and natural gas. Major commercial discoveries in proximity to the permits include the giant gas and condensate fields of the North West Shelf (Goodwyn, North Rankin and Perseus) and the significant oil fields of Lambert, Wanaea and Cossack are in the north of the region. Recently, new and sizeable gas discoveries have been made immediately west of the permits at Julimar, Brunello, Brulimar, Xena, Pluto and Wheatsone, while the Lady Nora and Pemberton discoveries have been made to the north.

Octanex’s exploration efforts over the initial term of WA-323-P and WA-330-P had been to define suitable drilling targets centred on the Winchester Prospect which straddles both permits Maps.  The main area of exploration focus has been the Parker/Webley faulted horst structure where the Winchester Prospect had been identified.  The Parker/Webley horst is seen as having potential for Triassic structural traps.  The aim has been to determine whether there is a large and viable structure at Winchester, with potential Triassic Mungaroo reservoirs and with sufficient potential for liquids rich gas to warrant drilling.

The proximity of WA-323-P and WA-330-P to existing infrastructure and likely future infrastructure extensions, as well as new infrastructure, bodes well for any discovery that may be made, whether that be oil or gas.  Significant future demand for gas to supply both domestic demand and the proposed Wheatstone and Pluto LNG developments are anticipated.  Therefore, any potential gas discovery made in the WA-323-P and WA-330-P permits is seen as being valuable and capable of monetisation, particularly so if such a gas discovery were to be rich in gas liquids.

Work Programme:
The permits are in year 1 of their first 5-year renewed terms where the work programme obligations are to acquire a new 3D seismic survey across both permits, followed by geotechnical studies in year 2 and a well in year 3 of WA-323-P.

WA-323-P & WA-330-P Location Map

WA-342-P – BROWSE BASIN – OFFSHORE WESTERN AUSTRALIA

Background:
The Octanex Group holds an 18.25% interest in the permit and the Operator of the permit and of the Cornea Joint Venture is Hawkestone Oil Pty Ltd, a subsidiary of Exoil Pty Ltd.

The Cornea Joint Venture members are:

The initial 6-year term of the permit expired on 28 November 2010 and a renewal for the first 5-year term has been granted by the Designated Authority and commenced on 4 January 2011. The renewed permit comprises 21 graticular blocks (approximately 1,755 km² or 433,670 acres in total) located in the Yampi Shelf part of the Browse Basin, offshore Western Australia Maps.

The Cornea oil and gas accumulation was discovered by Shell within the early exploration wells Cornea-1, 1B and 2. The wells are considered to have established the presence of a 25m gas column and a 22.2m oil column in the Albian sandstones of the Jamieson Formation. The field is a large drape feature. It accumulated 22 to 24 degree API oil derived from Early Cretaceous, Echuca Shoals Formation and possibly Late Jurassic source rocks in the Heywood Graben, located over 60km to the west. The field is split into three main structural components – Cornea South and Cornea Central, both with gas and oil, and Cornea North with gas and no underlying oil presence.

In December 2009, Cornea-3 was drilled into the known oil and gas accumulation by the Songa Venus semi-submersible rig. The objectives of the Cornea-3 well were to define the location of hydrocarbon contacts and obtain data on the potential reservoir qualities of the Middle Albian and Lower Jamieson Formation.

The well penetrated the targeted Middle Albian and Lower Jamieson Formation B and C sand reservoir interval (2.2 metres deeper than predicted) but, as planned, just below the predicted gas oil contact. The well was then deepened to penetrate exploration targets in the Early Albian and Aptian of the Lower Heywood Formation, before terminating at a total depth of 910.6m MDRT (measured depth below rotary table). The data obtained while drilling indicated the intersection of a hydrocarbon bearing column in the Middle Albian, Lower Jamieson Formation. The secondary exploration targets in the Lower Heywood Formation did not contain hydrocarbons.

Work Programme:
The permit is in year 1 of its renewed term where the committed work programme obligations in that and year 2 are to carry out geotechnical studies, followed by a well in year 3.

WA-342-P Location Map

WA-362-P, WA-363-P, WA-386-P, WA-387-P – EXMOUTH PLATEAU – OFFSHORE WESTERN AUSTRALIA

Background:
Following the drilling of the Gawain-1 and Galahad-1 wells in WA-362-P and WA-363-P respectively (see details below), the Octanex Group holds a 20% interest in the WA-362-P and WA-363-P permits and retains its 40% interest in the WA-386-P and WA-387-P permits.

Prior to the drilling of the two wells, Eni Australia Limited (Eni) became the Operator of the WA-362-P and WA-363-P permits and their Joint Ventures, while the Operator of the WA-386-P and WA-387-P permits and their Joint Ventures remains OMV Australia Pty Ltd (OMV).

The members of the WA-362-P and WA-363-P Joint Ventures and their interests are:

The members of the WA-386-P and WA-387-P Joint Ventures and their interests are:

The permits were granted by the Designated Authority on 22 June 2005 (re WA-362-P and WA-363-P) and 21 August 2006 (re WA-386-P and WA-387-P), all for a period of six years.  They comprise a total of 457 graticular blocks or part thereof (approximately 37,795 km² or 9,339,350 acres in total) located on the Exmouth Plateau part of the Carnarvon Basin, offshore Western Australia Maps.

The permits are on the northern margin of the Exmouth Plateau, 300 to 400 km north-west of the Western Australian coastline.  The Exmouth Plateau is the largely unexplored deepwater frontier of the Carnarvon Basin, Australia’s largest petroleum basin, which includes the giant gas resources of the North West Shelf (Goodwyn), the Greater Gorgon region and Io/Janz.

In August 2007, three Octanex Group companies entered into farmin arrangements with OMV and Eni and four separate Joint Ventures with them; the Joint Ventures relating to each permit.  From the outset, OMV and Eni indicated their intention to comprehensively explore the four permits and, to that end, they acquired approximately 7,400 km of new 2D seismic data, known as the Klimt 2D Marine Seismic Survey, and 3,955 km² of new 3D seismic data, known as the Schiele 3D Marine Seismic Survey.

The first farmin decision point for OMV and Eni was to commit to the drilling of a well in any one of the permits or re-assign their entire (joint) 60% interest in all four permits back to the Octanex Group. That drilling commitment was made by OMV and Eni in relation to both the WA-362-P and WA-363-P permits.

Under the terms of the farmin agreement, OMV and Eni would earn a further 20% interest in each permit from the Octanex Group companies by meeting all the costs of the first two wells that they may elect to drill in that permit.  This would leave the Octanex Group with a residual 20% interest in each permit where such a commitment is made.

The Octanex Group elected to participate and be free carried through the first well that OMV and Eni committed to and drilled in each of the WA-362-P and WA-363-P permits and will also be free carried through the next well in these permits, should a well be drilled in either or both of them.

The Gawain-1 and Galahad-1 wells were drilled in the WA-362-P and WA-363-P permits respectively Maps. Both of the wells targeted Triassic Mungaroo Formation channel sands, within a horst structure. The Gawain-1 well target was within a horst on the Gigantor structure and the Galahad-1 well target was within a horst on the Ghidorah structure. They were both drilled by the Saipem 10000 drillship.

The Gawain-1 well spudded on 12 February in WA-362-P and was drilled through the top and mapped closures in the Triassic Mungaroo Formation before reaching a total depth (TD) of 3962m MDRT (measured depth below rotary table). The well intersected the top sandstone in the Mungaroo Formation at approximately 2693m MDRT; being 94 metres deep to prognosis. The top Mungaroo Formation sandstone was intersected without gas or hydrocarbon shows, although hydrocarbon fluorescence was observed in three thin sandstones, but without any significant gas being recorded. There were no hydrocarbons encountered while drilling the second intra Mungaroo Formation mapped closure at 3832m MDRT or through to the TD. A suite of wireline logs was run over the bottom section of the well prior to it being plugged and abandoned as planned.

The drillship then moved to the location of Galahad-1 in WA-363-P and that well spudded on 24 April 2011. The well was drilled through the top and a series of mapped closures that possessed AVO (amplitude versus offset) anomolies in the Triassic Mungaroo Formation before reaching a TD of 3488m MDRT. The well intersected the top sandstone in the Mungaroo Formation at approximately 2247m MDRT; being 42 metres shallow to prognosis. The top and intra Mungaroo Formation sandstones were intersected without gas or hydrocarbon shows, although a thin sand with elevated gas readings was encountered in the section of the well below the deepest AVO anomaly target. A suite of wireline logs was run over the open section of the well prior to it also being plugged and abandoned as planned.

With respect to the remaining two permits, WA-386-P and WA-387-P, Octanex has the right to make an election as to whether to receive a cash consideration of US$16,000,000, should OMV and Eni make an election to drill a well in either or both of them. Alternatively, Octanex can again elect to retain a 20% fully carried interest through two wells in each permit where a drilling commitment is subsequently made.

The activities of the Joint Venture should also be viewed in a regional context where considerable exploration activity is underway in nearby permits. In a release to the ASX, Woodside Petroleum Limited provided some information about the leads and prospects it has identified in permits which adjoin WA-362-P and WA-386-P or are nearby to WA-386-P. Leads and prospects have also been identified by other operators active in the region and nearby to WA-386-P and WA-387-P Maps.

Work Programme:
The WA-362-P and WA-363-P permits are in year 6 and the work programme obligations to drill an exploration well in each permit have been met. The Designated Authority has granted an extension to year 6 of both permits to allow OMV and Eni to evaluate the seismic and drilling data obtained in the permits with a view to seeking renewals.

The WA-386-P and WA-387-P permits are in year 5 where the work programme obligations are to carry out geotechnical studies. Both of these permits currently contain a well obligation in year 6 but OMV and Eni have made application to the Designated Authority to vary the year 6 obligations and defer any drilling obligation in these two permits into their renewed terms, should renewals be sought.

Location Map of Exmouth Plateau Permits, Well Locations and Leads & Prospects

WA-384-P, WA-385-P, WA-394-P – SOUTHERN EXMOUTH SUB-BASIN – OFFSHORE WESTERN AUSTRALIA

Background:
The Octanex Group originally held a 100% working interest in all three permits but, following a transaction with Shell Development (Australia) Pty Ltd (Shell), now holds only residual and royalty interests in each one.

The permits were granted by the Designated Authority on 21 August 2006 (re WA-384-P and WA-385-P) and 21 February 2007 (re WA-394-P), all for a period of six years.  They comprise a total of 134 graticular blocks (approximately 10,628 km² or 2,626,235 acres in total) in the Southern Exmouth Sub-basin part of the Carnarvon Basin, offshore Western Australia Maps.

In February 2008, the Octanex Group entered into agreements with Shell for the disposition to Shell of a 100% working interest in the permits but retained certain rights.  The Octanex Group holds residual rights in each of the permits in the form of discovery payments and royalties, as well as rights of reconveyence.

Shell has carried out extensive seismic operations over the permits by conducting the Guacamole 2D survey. That survey acquired 3,440 km of new 2D seismic data that has been processed and interpreted. Shell has also made the commitment to Octanex to drill a well in WA-384-P prior to the end of year 6 of the permit (i.e. by August 2012) and acquired a new 3D site survey of 680 km² named Salsa.

Shell has recently advised that drilling operations are being planned for 2012, subject to receipt by Shell of all required regulatory approvals. The well, to be known as Palta-1, is to be drilled in water depths of approximately 1350m and to a total depth of 5325 to 5675m.

With respect to the WA-385-P permit, Shell was initially required to make a decision by 21 August 2010 to commit to drill a well in the permit or re-assign a 100% interest in the permit to Octanex if no drilling commitment was made. Octanex agreed to defer Shell’s requirement to drill a well until year 3 of any renewal of this permit, if and when renewed, on the basis that Shell has committed to acquire a new seismic programme in WA-385-P in year 6 of the initial permit term.

Similarly, Shell was initially required to make a decision by 21 February 2011 to commit to drill a well in the WA-394-P permit or re-assign a 100% interest in the permit to Octanex if no drilling commitment was made. Octanex agreed to defer Shell’s requirement to drill a well until year 3 of any renewal of this permit, if and when renewed, provided Shell commits, before 30 November 2011, to acquire a new seismic programme in WA-394-P.

Shell is a world class operator and is committed to the conduct of a thorough assessment of the exploration potential of the three permits.  While the Octanex Group no longer has any direct equity interest in the permits, it retains significant access to the upside exploration potential in them through the mechanism of the discovery payments and the overriding royalty described below.

Specifically with respect to future related terms of the Octanex Group’s agreements with Shell:

• Shell has agreed it must either commit to a well in each permit (within the timeframes outlined above) or reassign the 100% interest for nil consideration for any permit where no well commitment is made.
• Shell has agreed to make two tranches of Discovery Payments (being either (a) or (b)) to the Octanex Group for any Discovery (as defined in the agreement) made in a permit but limited to a maximum of three Discovery Payments per permit.  Within six months of having made a Discovery Shell must either:
    (a) Pay US$5,000,000 to the Octanex Group; or
    (b) Reassign to the Octanex Group a 100% interest in the permit in which the Discovery was made.
• Following an initial Discovery Payment as described above, if Shell:
    (a) spuds an appraisal well in respect of the Discovery; or
    (b) applies for a production licence or retention lease in respect of any Discovery,
  then Shell must pay a further US$5,000,000 to the Octanex Group.
• Shell has also granted the Octanex Group a 1% Overriding Royalty (as defined in the agreement) payable on the basis of the gross assessable petroleum receipts recovered from a permit.
• If at any time Shell wishes to exit from any of the three permits, a 100% interest in the relevant permit must be offered back to the Octanex Group.

Work Programme:
The permits are all in year 5, where the work programme obligations are to carry out geotechnical studies, followed by an exploration well in year 6 of each permit. Shell has committed to the well obligation in WA-384-P, has applied to the Designated Authority to vary the year 6 work obligation in WA-385-P and has further time to decide on the year 6 work obligation for WA-394-P.

As outlined above, Shell can decide whether to continue in each permit or withdraw and offer to re-assign the 100% interest as required by the farmin terms.  Until such decisions are made, the Octanex Group has no exposure to costs, nor any work obligation to perform in any of the permits.

SOUTHERN BONAPARTE BASIN INTERESTS

The Octanex Group holds interests in seven petroleum exploration permits in the offshore Southern Bonaparte Basin. Those permits are WA-375-P, WA-376-P, WA-407-P, WA-420-P, WA-421-P, WA-440-P and WA-441-P and they are displayed in the location map Maps.

Location Map showing Southern Bonaparte Permits

WA-375-P & WA-376-P – BONAPARTE BASIN – OFFSHORE WESTERN AUSTRALIA

Background:
The Octanex Group holds a 75% interest in both of these permits and the Operator of the Torrens Joint Venture is Goldsborough Energy Pty Ltd, a wholly-owned subsidiary of Octanex NL.

The Torrens Joint Venture members are:

The permits were granted by the Designated Authority on 6 February 2006, both for a period of six years.  They comprise 65 graticular blocks (approximately 5,420 km² or 1,339,310 acres in total) located in the Southern Bonaparte Basin, offshore Western Australia Maps.

During year 3 of the permits, the Gold 2D seismic survey acquired some 1,875 line km of new data, of which 1,800 km was within the area of the WA-375-P and WA-376-P permits. That survey data has undergone a number of rounds of processing and has been interpreted.

A ‘region-wide’ reprocessing project has been completed that incorporated in excess of 11,675 km of existing 2D data, including approximately 730 km of 2D data previously acquired within the area of WA-375-P and WA-376-P.

The area of main interest in the permits is in the vicinity of the Torrens-1 well, which encountered what are thought to be residual oil shows. Torrens-1 was drilled by Kufpec Australia Pty Ltd in 1993 and targeted fluvio-deltaic sandstones of the Keyling Formation within a three-way dip and fault dependent closure below the Hyland Bay Formation. Increasing closure was mapped with depth and the well was directionally drilled below the lower section of the Hyland Bay Formation to ensure all potential objectives would be intersected in a near crestal position. The well reached a total depth of 2497 MDRT within the Kuriyippi Formation. Two main zones of hydrocarbons were encountered; residual oil in sandstones of the Fossil Head Formation at 1517 – 1523.8 MDRT, and possible minor moveable oil and gas at low saturations in the Tern Member of the Hyland Bay Formation at 994 - 1000.5 MDRT.

Analyses of oil inclusions in detrital grains provided evidence for the existence of three palaeo-oil columns at Torrens-1; a 42 metre thick column within the Permian Fossil Head Formation and two separate columns within the Late Carboniferous Kuriyippi Formation.

Work Programme:
The permits are in year 6 of their initial terms where the work programme obligations in both cases are to continue geological studies and review the permit data obtained to date with a view to seeking renewals.

WA-407-P, WA-420-P, WA-421-P & WA-441-P – BONAPARTE BASIN – OFFSHORE WESTERN AUSTRALIA

Background:
The Octanex Group holds a 100% interest in each of these four adjacent permits.

The permits were granted by the Designated Authority on 19 July 2007 (WA-407-P), 13 November 2008 (WA-420-P & WA-421-P) and 1 September 2009 (WA-441-P).  The permits comprises 232 graticular blocks or part thereof (approximately 18,950 km² or 4,682,650 acres in total) located in the Southern Bonaparte Basin, offshore Western Australia Maps.

With the exception of WA-441-P, there is an extensive grid of existing seismic data available within the permits and over the area adjacent to them.

The ‘region-wide’ reprocessing project, that covered more than 11,675 km of existing 2D data acquired by earlier operators, has been interpreted and integrated with the more recent Gold 2D data. Interpretation of the reprocessed data has assisted with locating new 3D and 2D seismic surveys that are to be acquired over the WA-407-P, WA-420-P and WA-421-P permits. These surveys are planned to be undertaken in 2H 2011.

Work Programme:
The permits are in years 2 or 3 of their initial terms, where the work programme obligations include geotechnical studies, seismic reprocessing and the acquisition of new seismic data.

WA-440-P – BONAPARTE BASIN /PETREL SUB-BASIN – OFFSHORE WESTERN AUSTRALIA

Background:
The Octanex Group holds a 100% interest in this permit.

The permit was granted by the Designated Authority on 1 September 2009 and comprises 52 graticular blocks (approximately 4,310 km² or 1,065,025 acres) located in the Southern Bonaparte Basin, offshore Western Australia Maps.

The WA-440-P permit is located immediately east of the Blacktip Gas development and the Turtle/Barnett oil accumulations. The area of main interest in the permit is in the trend between the Lesueur-1 and Cambridge-1 wells where oil shows were encountered.

Recent Developments in the Petrel Sub-basin:
The Blacktip field, located immediately to the east of the WA-440-P permit, has now been developed by Eni and is the first such development in the Sub-basin. The project comprises a full well stream transfer from an unmanned wellhead platform, via a 107 km submarine pipeline, to an onshore gas plant in the remote location of Wadeye. The gas is treated for the removal of condensate and water and then exported via an onshore pipeline. The condensate is stabilised and stored for a periodic transfer via an offshore loading facility to a marine tanker for onward transportation.

More recently, Santos and GDF SUEZ (a leading European LNG company) have announced a partnership to develop Petrel/Tern/Frigate by way of an LNG project and to develop and operate a proposed floating liquefaction plant, with a planned capacity of 2mtpa of LNG, which will utilise the gas from the three natural gas fields. As Operator of the project, GDF SUEZ will lift all the LNG production and ship it to markets in the Asia-Pacific region on behalf of the joint venture.

As part of the project, Santos has agreed to sell a 60% interest in the Petrel, Tern and Frigate offshore gas fields to GDF SUEZ for a total consideration of up to US$370 million, made up of a cash consideration of US$200 million and a contingent consideration of US$170 million to be paid upon Final Investment Decision (FID) to develop the assets. GDF SUEZ will also fully carry Santos’ share of a pre-FEED (front end engineering design) and FEED development costs for the project and Santos’ share of the upstream pre-FEED and FEED development costs for the Petrel, Tern and Frigate offshore gas fields.

Work Programme:
The WA-440-P permit is in year 2 of its initial term where the work programme obligations are to collect data and conduct geotechnical studies, followed by an obligation to complete a new 2D seismic survey in year 3.

WA-440-P Location Map

T/18P ROYALTY INTEREST – BASS BASIN – OFFSHORE TASMANIA

Background:
The Octanex Group holds a 0.1667% royalty interest in respect to T/18P, a petroleum exploration permit in the Bass Basin of Tasmania. The royalty was established in 1986 when Octanex NL’s wholly-owned subsidiary, Goldsborough Pty Ltd, exchanged its remaining working interest in T/18P for the royalty interest.

The royalty relates to an amount equal to the total gross petroleum produced from the permit or any successor title less any amount payable with respect to government royalties and other interests of that nature. As a result of this transaction the holder of the royalty (Goldsborough Pty Ltd) was relieved of any obligation to contribute further funds to the exploration of the permit or to contribute to any costs of development or production.

TARANAKI BASIN INTERESTS

As displayed in the Taranaki Basin permit location map Maps, the Octanex Group holds interests in three petroleum exploration permits in the offshore Taranaki Basin, namely PEP 51906, PEP 52593 and PEP 53537. Octanex has also lodged an application for a 100% interest in a further permit in the basin, namely APPL 53473.

The Octanex Group has built a substantial exploration position in the offshore Taranaki Basin; the premier basin for oil and gas exploration and production within New Zealand. The country has an excellent fiscal regime for petroleum exploration, well established exploration and production infrastructure and ready availability of a skilled work force.

All of the New Zealand permit interests held or applied for by the Octanex Group are well located for the discovery of hydrocarbons and New Zealand is now an important part of the Octanex Group’s overall exploration portfolio.

Taranaki Basin Permit Location Map

PEP 51906 – TARANAKI BASIN – OFFSHORE TARANAKI – NEW ZEALAND

Background:
Following a farmout of 65% of the then 100% interest held in the permit (as detailed below), the Octanex Group now holds a 35% interest in the permit. The Operator of the permit and of the Joint Venture is OMV New Zealand Limited (OMV NZ).

The PEP 51906 Joint Venture members are:

The permit was granted by the Government of New Zealand on 19 November 2009 for a period of five years.  It comprises approximately 1,613 km² or 398,580 acres in total located in the Taranaki Basin, offshore of the North Island province of Taranaki, New Zealand Maps.

PEP 51906 is strategically located in what is considered to be a highly prospective area of New Zealand’s only producing hydrocarbon basin; the Taranaki Basin. It is adjacent to three producing fields; the Maui gas/condensate field to the east (which has been in production since 1979), the Tui oil field to the north-east (which has been producing since 2008) and the Maari/Manaia fields to the south (which commenced production in 2009).

A PEP 51906 location and leads map shows the position of the permit area in the offshore basin, some of the existing leads within the area of the permit, the potential source rock areas and hydrocarbon migration paths Maps.

The permit area is prospective for both oil and gas and the main area of exploration focus has been on four features visible on the older data – Kakapo, Kea Deep, Toke and Matuku. In addition to those four features, Octanex believes there are a number of other potential features that may warrant the acquisition of further seismic in order to ascertain if they can be elevated to lead or prospect status.

Only one well has been drilled within the area of the permit; Kea-1. That well aimed to evaluate the hydrocarbon potential of the Kapuni sands but was found to be water bearing. There remains potential in a deeper part of the Kea feature, adjacent to the bottom hole location of Kea-1.

Prior to 30 June 2010, Octanex completed the work programme for the first period of the permit (ending May 2011) which required the reprocessing of 1,500 km of existing 2D seismic data within the first 18 months. Initial interpretation of the reprocessed data identified further leads, one of them in the southern part of the permit named Kaka Maps.

In May 2011, Octanex announced that the farmout agreement that had been entered into with OMV NZ in respect of the PEP 51906 permit had became unconditional. Under the terms of that agreement, Octanex assigned a 65% participating interest in PEP 51906 to OMV NZ; while Octanex retained a 35% participating interest and will be free carried through certain agreed phases of exploration. On the assignment of the 65% interest, OMV NZ became the Operator and made it clear to Octanex that it is committed to an in-depth exploration of the permit.

The phases of exploration for which Octanex has been reimbursed or is being free carried by OMV NZ are:

• OMV NZ reimbursed the exploration costs that Octanex had incurred in relation to PEP 51906;
• OMV NZ has met 100% of the costs of a new 3D seismic programme of not less than 270 kms² in an area within PEP 51906 surrounding the Matuku Prospect, plus an amount of new 2D seismic;
• On or before 19 November 2012, OMV NZ must commit to the drilling of a well within the area of the permit or re-assign all of its 65% participating interest in PEP 51906 back to Octanex; and
• Until the earlier of the date OMV NZ reassigns its 65% participating interest in PEP 51906 back to Octanex or a well has been drilled in the permit, OMV NZ will meet 100% of the costs of all exploration activities in the permit, including 100% of the costs of a well if and when drilled.

The 3D seismic survey over the Matuku Prospect was completed in July 2011. In conjunction with the 3D survey, OMV NZ also acquiring approximately 120 km of 2D seismic data across parts of the PEP 51906 permit. The seismic survey was carried out by Reflect Geophysical Pte Ltd and the acquisition vessel was the “Orient Explorer”.

OMV NZ already has substantial interests in oil and gas producing fields in New Zealand and is that country’s largest liquid hydrocarbon producer, the third largest gas producer and a major explorer in the offshore Taranaki and Great South Basins. OMV NZ’s interests include being the operator of the Maari oil field (PMP 38160), located to the immediate south of PEP 51906 and in which it holds a 69% interest, a 10% interest in the Maui gas/condensate field (PML 381012) and a 26% interest in the Pohokura gas/condensate field. All of these fields are located in the offshore Taranaki Basin.

Octanex is confident OMV NZ will be able to bring to bear a considerable amount of exploration and operational experience and knowledge regarding the hydrocarbon potential within PEP 51906; a permit Octanex considers has the potential to contain a number of discrete oil accumulations.

Work Programme:
The permit is in the second period (ending May 2012) where the work programme obligations are to acquire, process and interpret a new 3D seismic survey. A decision is then required by the end of the third period (being May 2013) on whether to commit to drill a well by the end of the year 4 or surrender the permit.

PEP 51906 Location and Leads Map

PEP 52593 – TARANAKI BASIN – OFFSHORE TARANAKI – NEW ZEALAND

Background:
The Octanex Group holds a 100% interest in this permit.

The permit was granted by the Government of New Zealand on 1 April 2011 for a period of five years.  It comprises approximately 3,509 km² or 867,095 acres in total located in the Taranaki Basin, offshore of the North Island province of Taranaki, New Zealand Maps.

PEP 52593 is to the north of the producing Tui oil field and appears to overly rocks that have been buried deep enough and long enough to have generated hydrocarbons. There is also reasonable evidence from past exploration of the potential for good quality reservoir sequences within the permit. Locating a robust trap for any hydrocarbons that may have been generated within the permit area or on a migration pathway is the prime focus of Octanex’s initial exploration efforts in PEP 52593.

While the area of the permit has been the subject of various seismic surveys, many of these are relatively old. Four wells have been drilled within the area of PEP 52593 but the most recent of these was in 1992. Octanex has acquired all the seismic data across the area of the permit and a reprocessing contract has been awarded to DownUnder Geosolutions in Perth.

Work Programme:
Under the terms of the permit, the reprocessing of a minimum 2,000 km of 2D data is due to be completed within 18 months of the permit grant date of 1 April 2011. Following the reprocessing, and not later than 24 months after the permit grant date, Octanex can either surrender the permit or commit to acquire, process and interpret a minimum of 2,250 km of new 2D seismic data. Alternatively, Octanex can surrender a minimum of 25% of the permit area and commit to acquire, process and interpret a minimum of 1,750 km of new 2D seismic data.

By not later than 1 April 2014, Octanex must either commit to drill a well or surrender the permit.

PEP 53537 – TARANAKI BASIN – OFFSHORE TARANAKI – NEW ZEALAND

Background:
The Octanex Group holds a 35% interest in this permit and the Operator of the permit and of the Joint Venture is OMV NZ.

The PEP 53537 Joint Venture members are:

The permit was granted by the Government of New Zealand on 5 July 2011 for a period of five years.  It comprises approximately 1,146 km² or 283,180 acres in total located in the Taranaki Basin, offshore of the North Island province of Taranaki, New Zealand Maps.

PEP 53537 adjoins the western boundary of the PEP 51906 permit. There is an extensive grid of 2D seismic data of various vintages covering the southern, western and north-eastern sections of the permit area. A significant potion of the Hector 3D seismic survey acquired by AWE in 2005 is also located within the area of the permit and four wells have been drilled on or close to the western and southern boundaries (Kiwa-1 in 1981, Hochstetter-1 in 2000, Pukeko-1 in 2004 and Hector-1 in 2007).

Based on previous successful drilling results in areas close to the PEP 53537 permit, the Kapuni Group plays are seen to be the most prospective for the permit, although possible targets in the Moki Formation will also be analysed.

The work undertaken to evaluate what is seen as a permit with prospectivity will be strongly influenced by evaluation of the adjacent PEP 51906 permit, so encouraging results in PEP 51906 are likely to result in additional evaluation and exploration work being carried out in the PEP 53537 permit.

Following the Matuku 3D seismic survey that was acquired in the neighbouring PEP 51906 permit, the seismic vessel, “Orient Explorer”, carried out the required seismic surveys in the PEP 53537 permit and acquired 100 km of 2D data and 18 km² of 3D data.

Work Programme:
Under the terms of the permit, geological studies, reprocessing of existing 2D seismic data and new 2D and 3D seismic surveys are to be acquired, processed and interpreted within 18 months of the permit grant date of 5 July 2011. Within 24 months of the grant date, further geotechnical studies are to be undertaken and a commitment made to drill an exploration well or the permit surrendered.

The commitment well must be drilled within 36 months of the grant date; this being not later than 4 July 2014.

APPLICATION FOR PEP 53473 – TARANAKI BASIN

In March 2011, Octanex applied for 100% of a fourth New Zealand petroleum exploration permit, PEP 53473, that is also located in the offshore Taranaki Basin. The area applied for lies between the PEP 51906 and PEP 52593 permits, in which the Octanex Group holds 35% and 100% interests respectively, and is adjacent to the Tui oil field Maps.

The application area extends to 853 km², is covered by an extensive grid of 2D seismic data of various vintages and has had two wells drilled within it, one of which (Kopuwai-1) encountered some oil shows. There has been no modern 3D seismic data acquired within the permit area.

Work Programme:
The broad objective of the exploration effort proposed within the application is to:

• reprocess and interpret the existing 2D seismic data set and complete permit related studies;
• acquire, process, interpret and map new 3D seismic data; and
• drill an exploration well.