Nelson Resources Limited Acquires 50% of the Arman field

Arman Field, Kazakhstan
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Nelson Resources has entered into a definitive sale and purchase agreement to acquire a 50% interest in the Arman field in Kazakhstan from the Kazakh state oil company Kazmunaigas.

Nelson will pay a purchase price of U.S.$10.8 million from existing cash resources. The closing of the transaction remains subject to normal government and regulatory approval, and is expected to occur in January 2005.

The 8,650 acre Arman field has total estimated remaining reserves of approximately 10.8 million barrels of oil (as at January 1, 2004, Kazmunaigas estimate), and is currently producing approximately 4,500 barrels of oil per day (Kazmunaigas estimate). The field is located on the Caspian shoreline, 200 kilometers north of Aktau, and is operated by Arman LLP, a joint venture which will be owned 50% by Shell Kazakhstan Development B.V. ("Shell") and 50% by Nelson. Shell will continue to hold operating responsibility for the field. The field is 30km north of the North Buzachi field, in which Nelson also has a 50% interest.

The joint venture was awarded a 30-year commercial development license in 1994, and since then field development has included the use of advanced drilling technologies such as hydraulic fracturing and cluster drilling, as well as the construction of first class processing facilities. A 3D seismic survey of the field was acquired in 1997. In addition to processing oil produced at the field, the facilities are already processing 10,500 barrels of oil per day from the North Buzachi field. The existing facilities are currently being de-bottlenecked in order to further increase processing capacity.

The field has direct pipeline access to key export transportation routes including the Atyrau-Samara and CPC pipelines, and currently has a contract with CPC for transportation of the field's crude oil to export markets.

Nick Zana, Nelson's Chief Executive Officer, commented, "This strategic investment is an important addition to Nelson's growing portfolio of interests in producing oil and gas assets in Kazakhstan. The Arman field is at an advanced stage of development and requires little further capital expenditure. In addition to boosting our reserves and production, acquisition of this field will also allow us to take advantage of synergies with our existing assets, especially regarding oil processing and transportation."

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