Oilex Expects to Start Drilling on Block 56 in Early 2007

As announced last month, the Government of the Sultanate of Oman has awarded Block 56 to a consortium led by Oilex (as operator), subject to signing an Exploration & Production Sharing Agreement. Block 56 was Oilex's first choice block and the highest rated of the blocks on offer in the bid round that closed on 1 January 2006. The block is located onshore, adjacent to producing fields operated by PDO, the Oman national oil company, in the South Oman Salt Basin, which is one of the main producing basins in Oman.

The acreage on offer in the recent bid round comprised three blocks on the eastern side and 2 blocks on the western side of the South Oman Salt Basin (see map). The recognition of 20 structural leads and the possibility of an extension of the proven Ara salt play across Block 56 justified a comprehensive work program set out in the Consortium's bid application. Potential has been recognized for targets ranging from the Cambrian Buah formation to the Cretaceous Wasia group in areas where depth of burial is sufficient to mitigate the biodegradation of oil at the shallower levels.

The possible presence of a thicker sedimentary section in the eastern area implying a more extensive distribution of the Ara Salt unit into Block 56 raises the possibility of salt related structures similar to those producing to the west in the main salt basin.

The density and quality of seismic coverage was not considered to be sufficient to identify immediately drillable prospects and 2D and 3D seismic acquisition is a prominent component of the proposed work program. The value of the work program is estimated to be about US$7.5 million net to Oilex over the initial 3 year term. Drilling is expected to start first half 2007.

The award completes another element of the company's stated strategy of acquiring high quality exploration acreage in countries around the Indian Ocean rim in joint venture with its Indian alliance members.

The consortium comprises Oilex (25% and Operator), Gas Authority of India (25%), Videocon Industries Ltd (25%), Hindustan Petroleum Corporation Ltd (12.5%) and Bharat Petroleum Corporation Ltd (12.5%) from India. The award was made subsequent to evaluation of offers made under the recent bidding round that closed on January 1, 2006.