Encore Oil to Undertake Offshore Gas Storage Feasibility Study

EnCore Oil reports that Virgo Energy Limited has entered into an agreement with Star Energy Group plc for Star Energy to farm into Virgo's UKCS Block 43/8 Forbes field in order to undertake a feasibility study and a 3D seismic survey to determine the potential to use the Forbes field as a gas storage facility.

EnCore has entered into an agreement to acquire Virgo, together with three other companies. The acquisitions are subject to the usual regulatory consents. Completion of the acquisitions is expected in the near future.

Under the terms of the farm out agreement, Star Energy will undertake a feasibility study, and, if the feasibility study proves positive, a subsequent Front End Engineering & Design (FEED) study. In addition, Star Energy will pay 1 million towards the cost of a 3D seismic survey on the Forbes field and assign 50% of its interests in the Eskdale (PEDL 002) onshore license to Virgo. The farm out agreement allows Star Energy to earn up to 50% of the Forbes license and to become operator if the field is developed into a gas storage facility.

The Forbes field was originally developed by Hamilton Oil and produced via a tie-back to the Esmond field. The field produced approximately 48 bcf of gas prior to abandonment. The original gas in place was in the order of 100 bcf.

Preliminary studies undertaken by Star Energy indicate the field has the potential to be developed into a high performance gas store with up to 50 bcf of working gas capacity. Under the farm out agreement, the feasibility study must be completed by the end of June 2007.

Roland Wessel, CEO of Star Energy, said:

"Star Energy has an operational 10 bcf gas storage facility at Humbly Grove in Hampshire and a further 80-90 bcf of onshore projects under development. Forbes is an excellent candidate technically; the reservoir is high quality, it has cushion gas in place and is close to major infrastructure. We believe there will be sufficient industry support for a 50 bcf offshore gas store that justifies the much higher capital costs associated with offshore projects."

Alan Booth, Chief Executive Officer, commented:

"We are delighted to be working with Star Energy on this exciting project. The recently announced DTI review of offshore gas storage recognises that the UK needs to increase its gas storage capacity. We feel that this new partnership with Star Energy will provide an opportunity for our shareholders to participate in an increasingly important part of the UK's future energy strategy. The acquisition of 50% interest of Eskdale (PEDL 002) will also increase our onshore portfolio in the North of England."

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