Slower Drilling Rates Prompt AWE, Partners to Raise Tui Budget

The project risks continue to be reduced and the project remains on schedule for first oil by June 30, 2007. The joint venture has approved a 9% budget increase to account for slower drilling rates than anticipated, but also because of the lengthening of the Tui-2H production well, which intersected a more extensive oil column than predicted.

The Tui Area Development is located within PMP 38158, in the Taranaki basin, approximately 50 kilometers offshore of the west coast of the North Island of New Zealand. When fully commissioned, a production rate peaking at 50,000 barrels of oil per day is anticipated.

Progress on Construction of Facilities

Significant progress has been made on the construction activities, commensurately reducing the project risks.

All of the development's major construction components are now manufactured, and most have been delivered to New Zealand. This equipment includes the tubulars and other well related equipment, subsea trees, FPSO anchors and associated mooring components, flowlines, gas lift lines, umbilicals, risers and mid-water arches.

Installation of the facilities is now well underway: The anchors and chains for the FPSO have been successfully pre-installed. Two of the four mid-water arches, the most weather-sensitive installation activity, were installed in a favorable weather window last week.

The FPSO, which is to be leased from the Norwegian company Prosafe, is also in the final stages of construction in Singapore and is scheduled to arrive in New Zealand in mid-April.

Progress on Development Drilling

Three of the four production wells (Tui-2H, Tui-3H and Pateke-2H) have had the tophole sections drilled and cased with the subsea production trees installed. The fourth well, Amokura-2H, will be drilled and have the last subsea tree installed immediately after completing the well currently being drilled, Tui-3H.

The first production well in the program (Tui-2H) has been completed and is suspended ready for production. Tui-2H intersected a thicker oil column than expected which led to the well being lengthened and completed with a 1,850 meter horizontal producing section in the oil reservoir. The cost of drilling the extended well, and the slower drilling rates generally have resulted in a 9% (US$20 million gross) budget increase.

As at 6 a.m. Tuesday, preparations were being made to recommence drilling operations in the Tui-3H well after having run and cemented casing to a depth of 3,917 meters measured depth. Progress for the week was 854 meters.

Commenting on the update, AWE's managing director Mr Bruce Phillips said:

"We are very pleased with the progress to date on the Tui project. However, risks remain and we will continue to proactively manage those risks to get the best possible outcome for all our stakeholders."

Participants in PMP 38158 are:

• AWE * (Operator) 42.5%
• Mitsui E & P New Zealand Limited 35.0%
• Stewart Petroleum Company Ltd ("New Zealand Oil & Gas") 12.5%
• WM Petroleum Ltd ("Pan Pacific Petroleum NL") 10.0%

* New Zealand Overseas Petroleum Pty Ltd (22.5%); AWE New Zealand Pty Limited (20.0%)