The full interpretation of the total of 750 sq. km merged 3D seismic data will allow the Company to further define the Lishui 36-1 gas discovery and adjacent prospects ("Lishui Gas Play") and to select the next well location(s). There may be some requirement for additional special processing of the data to enhance this evaluation.
The Company currently has funding in place and plans to drill one or two wells in the Lishui Gas Play with an aim to increase the current resource base in order to justify a commercial development. The Company will decide on the drilling location(s) in March/April 2007 and intends to commence drilling once the location is approved, subject to rig availability. The Company is currently in discussions with drilling contractors and CNOOC to secure a rig for the drilling program and acknowledges that it is facing increasingly difficult rig market conditions.
Primeline owns a 75% interest in the Petroleum Contract for Block 25/34 in the East China Sea with China National Offshore Oil Corp. and Primeline is also the operator for the Block. The Company made the gas discovery, Lishui 36-1, within the Block through two wells which have flow rates of 9.9 and 12.6 mmcfd of natural gas, respectively. Block 25/34 encompasses 7,006 sq. km in the basin where 7 additional previously drilled wells in and around the Block encountered oil and gas shows and flows, indicating that there is significant hydrocarbon potential in addition to the Lishui Gas Play.
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