Indo-Pacific Energy reports that operations have commenced at the Cheal site, and it is expected that production testing of the gas and oil bearing sands in the Cheal-1 and Cheal-2 wells will commence later this month. The rig arrived from the US during February, and was located on the Cheal site last week. The Cheal-2 wellhead and surface plug have been exposed, and site works are in progress. The intention is to conduct a one month flow test of each well, in order to establish Proven reserves such that a gas market can be secured and development of the field can proceed. The Cheal-1 & Cheal-2 wells both produced gas and oil at economic rates when originally tested in the mid 90's, and the rapidly strengthening New Zealand gas market has now made the field a viable development project. Following these production tests, a Cheal-3 well will be considered. Cheal is well situated near to several gas markets and infrastructure pipelines. A farmout agreement has been entered into with IRM (Malaysia) Inc., a company associated with Claire Energy Pty Ltd., which will see them fund 44% of the Cheal production tests and a following well, in order to acquire 33% interest in PEP 38738. Following this deal, Indo's equity in the permit will become 33.5%.