Longtom-3 Appraisal Well (Vic/P54 Permit):
Nexus has a 100% interest in the Longtom Gas Project which also includes front end engineering design studies.
On the current schedule, the Longtom-3 appraisal well will spud in the 1st week of July. The well is designed to evaluate the extent and productivity of gas bearing reservoirs encountered in the Emperor formation by the Longtom-1 and Longtom-2 wells. The Longtom-2 well intersected 96 meters of net gas sands over a gross interval of 260 meters. Longtom-3 will be drilled approximately 1.2 kms south-west from the Longtom-2 location.
The first phase of drilling will involve a near vertical well (the pilot hole) designed to confirm the presence, extent and quality of gas bearing reservoirs. Upon the confirmation of a minimum gas column the pilot hole will be plugged back and deviated. A horizontal well section will be drilled to intersect gas reservoirs encountered in the pilot hole. It is intended that the horizontal well will be completed and tested to confirm the productive potential of the reservoirs.
The vast bulk of the equipment required for the Longtom-3 well has now arrived in Melbourne. The largest single piece of equipment, the 33 ton sub-sea well head, is undergoing final preparations in Melbourne.
Galloway-1 Exploration Well (Vic/P39(v) Permit):
Santos and Tap Oil Limited are farming in to Vic/P39(v) through the drilling of Galloway-1. The post farm-in interests in the permit will be Nexus Energy with 37.5%; Santos as operator with 37.5% and Tap with 25%.
Longtom Gas Project: Vic/P54
In December 2005 Nexus signed a gas sales and processing agreement with Santos for up to 450PJ of gas from the Longtom Field. In light of this commitment, the two companies have now commenced coordinated front end engineering design studies on the project with the aim of being in a position to sanction the project in Q4 2006.
Nexus expects to drill the Longtom-3 appraisal well in July 2006. The successful testing will mark a major milestone on the way to sanctioning the project. Following the completion of the well, the resource size will be reviewed and the development plan finalized. Nexus expects first production prior to June 2008.
Apache Northwest, which has a 62.5% interest in Vic/P54, has a right to buy back into the field development following the drilling of Longtom-3 by paying Nexus six times the cost of its share of the project, plus back costs associated with its share of the program.
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