Under the terms of the farm-in Beach will earn a 20% interest in PEP 38259 by contributing to the cost of drilling the Cutter-1 exploration well. This well will be drilled, in a water depth of 75 meters, in mid to late 2006 to test the oil potential of the Cutter prospect, located approximately 21 km off the east coast of the South Island and 200 km southwest from Christchurch.
The farm-in provides Beach with an opportunity to participate in a high upside exploration project in a lightly explored permit in which there has already been a non-commercial gas-condensate discovery (Galleon-1). On test, the reservoir section in Galleon-1 produced 10.4 million cubic feet of gas per day with associated condensate at a rate of approximately 200 barrels per million cubic feet of gas.
Two prospects in the permit, Cutter and Barque, are currently considered ready for drilling. The Cutter prospect, as assessed by the Operator, has a potential recoverable volume of approximately 70 to 80 million barrels of oil. The larger prospect, Barque, as assessed by the Operator, has potential recoverable volumes of approximately 5 to 6 trillion cubic feet of gas with 500 million barrels of condensate. The Barque prospect, which is in 850 meters water depth, represents significant upside potential for future exploration within the permit.
Subject to execution of documentation, subsequent approval by the regulatory authority, and a separate farm-out to Claire Energy (Australia) Pty Ltd by Tap and AWE, interest holders in PEP 38259 will be:
Tap (New Zealand) Pty Ltd 40% (Operator)
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