AED & MODEC Sign Agreement for Second FPSO

AED Oil has entered into a Time Charter Agreement Letter of Intent with MODEC Inc (Elang EPS Pte Ltd) for the provision of an FPSO, the MODEC Venture 1 (MV1). This key agreement, together with planned drilling and development, will enable production from the Puffin South West (Puffin SW) region in the first half of 2008. The simulated initial production rate for the Puffin SW region is in excess of 25,000 barrels of oil per day (bopd). In the meantime, the Front Puffin FPSO, which will receive the production from the Puffin NE region, is undergoing final preparation and is due to arrive at Puffin field in September 2007.

The MODEC FPSO, which previously operated at Elang/Kakatua, was identified as a suitable vessel for the development of the Puffin SW field. Discussions with MODEC have been occurring for some time, and the operating conditions at the Elang/Kakatua field are not dissimilar to Puffin SW. The facilities at the Elang/Kakatua field, including mooring, flowlines, umbilicals and risers, will be redeployed and installed by MODEC at the Puffin SW field as part of the FPSO Agreement. The MV1 has a production capacity of approximately 32,000 bopd and storage capacity of 750,000 barrels. The Elang/Kakatua field is now in the process of being decommissioned. The MV1 has been operating at Elang/Kakatua for nine years and, prior to that, at the Skua field for five years.

The agreement is for a fixed term of three years, with two by one year option periods at AED's election. The vessel will undergo some minor modifications and maintenance prior to commencing work for AED.

On July 2, 2007, AED announced a 40 million Barrel Contingent Resource for the Puffin SW region. The Puffin SW region was first drilled and flow tested at high rates by Puffin-2 (1974 by ARCO). Puffin-9 was drilled by AED in 2006, confirming the quality and continuity of the SW, and proving the extent of the accumulation. AED intends to commence drilling a bilateral appraisal/development well (Puffin-10) in October 2007. The well is in design stage; however, based on reservoir simulation supported by the well testing data from Puffin-2, the Puffin-10 well is simulated to flow at an initial rate in the range of 25,000 to 32,000 bopd.

MODEC, which is the world's major FPSO owner, and owning and operating 17 FPSOs, will supply the MV1, complete the installation program and operate the FPSO during production at Puffin SW.

The Agreement with MODEC facilitates the commencement of the Puffin SW development. Following the drilling of the Puffin-10 bilateral well, the installation works will commence. The MV1 is expected to be on station at Puffin-10 toward the end of the first quarter 2008, with production commencing shortly thereafter.

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