Avery's wholly owned subsidiary, Bengal Energy International Inc., along with its two joint bidding partners, has received the Seventh New Exploration Licensing Policy ("NELP VII") provisional award of Block CY-ONN-2005/1.
The Block is a 946 square kilometer (233,761 acre) land block located in the Cauvery Basin, a Category 1 proven producing basin in southeast India. Avery has a 30% interest in the Block. The operator of the Block, GAIL (India) Limited ("GAIL"), holds a 40% interest and Gujarat State Petroleum Corporation ("GSPC") holds a 30% interest. NELP VII bids closed on June 30 and the formal award of blocks is expected by the end of August, after verification of data in the submitted bid documents. The formal government signing ceremony is expected to take place by the end of September.
The bidding process featured 57 blocks - 28 offshore and 29 on land. There were 181 bids in total from 75 Indian and 21 foreign companies. Of the 21 foreign firms, only four, including Bengal, were successful.
"The NELP VII provisional award is a tremendous accomplishment for us," said Bradley Johnson, Chief Executive Officer of Avery. "We believe the Block may contain over four times the potential resources of all of the Company's existing on-shore and off-shore interests. As well, we have strengthened relationships with some very large key players in India, and we believe we can add value for them by applying our strong technical and operational experience, as well as our access to Canadian practices and technologies, not only to the Block, but also to other oil and gas properties that they own and operate."
Avery has established two valuable alliances through the NELP VII bidding process. GAIL controls 78% of India's gas infrastructure and has interests in 27 oil and gas and three coal bed methane (CBM) blocks in India, operational presence in China, Egypt, Oman and other countries, and interests in liquid natural gas (LNG) facilities. GSPC has interests in 42 oil and gas blocks in India, interests in oil and gas blocks in Yemen, Egypt and Australia, and jointly developed the Hazira oil and gas field with Niko Resources.
Total budgeted capital expenditures for the exploration of the Block over the seven-year exploration period are US$18.1 million, of which Bengal will be responsible for 30% (US$5.4 million). In the initial four year phase, Bengal and its partners intend to undertake 2,000 kilometers of airborne magnetometry (aeromag) survey, reprocess 1,000 kilometers of 2D seismic survey, shoot 500 square kilometers of 3D seismic survey and 75 square kilometers of high resolution 3D seismic survey on three key prospects, and drill three wells. A minimum of one well is planned in the final three year phase.
Avery's focus on India is driven by several key factors. India is a net importer of oil and gas, producing only 25% of its petroleum requirements, and is the world's fourth largest consumer of energy. As a Commonwealth country and the world's largest democracy, it has a long-established history of British common law and an attractive fiscal environment. NELP bidding rounds are generally held every year, and over the last six years some of the world's largest oil and gas discoveries have been made in India.
In Australia, the second well in a seven-well drilling program with its Australian joint venture partner Santos Ltd. commenced drilling on July 7. This well was originally planned for mid-June, but was delayed due to heavy rains and resultant road damage. In addition, the Subzero-1 well (Avery 35% Working Interest) operated by Stuart Petroleum Limited will be plugged and suspended. Based on well logs and pressure data two thick tight gas zones in the Patchawarra sands are believed to hold potential in the well. The operation as planned will enable a subsequent completion and stimulation attempt and/or the potential to side track to a more optimally located structural position to fully evaluate the upside potential of this play.
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