Shell Scoops Up Six Sicily Channel Licenses from Northern Petroleum

Sicily Channel Operations
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Northern Petroleum has announced that its wholly owned subsidiary, Northern Petroleum (UK) Limited, has farmed-out six of its offshore Sicily Channel licenses in Italy, namely GR17-NP, GR18-NP, GR19-NP, GR20-NP, GR21-NP, GR22-NP ("Sicily Channel Licenses"), to Shell Italia E&P S.p.A.

Under the terms of the farm-out agreement, Shell will earn 55% in GR17-NP, GR18-NP and GR19-NP; and 70% in GR20-NP, GR21-NP and GR22-NP. Shell will pay 100% of Northern's back-costs on these licenses of €1.9 million and pay for 100% of the Q4 2008 reprocessing, the 2008/2009 2D seismic programme and thereafter two 3D seismic surveys if proposed by Shell and the optional drilling and testing of the first well.

Northern will remain the Operator during the initial seismic phase and Shell will assume operatorship for the drilling phase.

The unaudited, mean, combined and unrisked Prospective Resources of all mapped prospects in the six licenses from the present limited seismic data base is estimated by Northern at 1.9 billion barrels (100%) recoverable.

The tender process for the winter 2008/2009 2D seismic campaign is well advanced with negotiations underway with the preferred contractor.

The Agreement with Shell also envisages that Northern and Shell will hold further discussions on expanding the partnership in Italy.

The transaction is subject to approval by the government and regulatory ministries of Italy.

Derek Musgrove, Managing Director, Northern, stated:

"We are delighted to welcome Shell as a new partner in our offshore Sicily Channel licenses. Shell will bring to the project Italian thrust belt and production experience, in addition to its international major project and deepwater expertise.

"This marks the completion of a second Italian deal in recent months further demonstrating the prospectivity of the Group's Italian licenses. The indicative gross estimate of the optional work program that Northern will be carried on for its share up to the point of earn in by Shell on this acreage is in excess of €100 million.

In 2003, we perceived the potential of the thrust belt play in the Sicily Channel ahead of the new climate of gas oil prices and have been progressing these licenses for several years. The area under license in the Sicily Channel is 4367 km2 (equivalent to about 20 North Sea blocks) and if drilling is successful it could open up a new Western European hydrocarbon province."

Jean-Pierre Tallon, Relationship Manager and Country Chair, Shell Italia E&P, commented, "Shell is pleased to join Northern Petroleum in this venture which extends our relationship beyond the ongoing co-operation in the Netherlands. Shell is committed to its Italian business and we are delighted to be furthering this with a return to offshore exploration in the country.

"We view the Sicily Channel acreage as having significant potential and see this as an excellent opportunity to leverage our geological and operational knowledge of the Italian thrust belt in a new theatre of activity."


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