Salamander Confirms South Sebuku Exploration Success

Salamander Energy has completed drilling operations on the South Sebuku-1 ("SS-1") exploration well in the Bengara I PSC, East Kalimantan, Indonesia. Salamander holds a 25% interest in the Bengara I PSC.

The SS-1 well was drilled to a total depth of 1533 meters subsea and encountered multiple gas bearing sandstones in the Tabul and Meliat formations. Drill stem tests ("DSTs") were conducted across two of the gas-bearing zones, which flowed at an aggregate rate of 10.9 MMscfd.

An MDT survey was run which identified three gas zones in the Tabul formation. A DST across one zone at 575 meters sub-sea flowed at a rate of 7.4 MMscfd. In the deeper Meliat formation, a single zone was tested at a depth of 1250 meters sub-sea which flowed at a rate of 3.4 MMscfd.

The SS-1 well has been suspended as a potential future producer and the Bengara I partners are in discussion with the authorities with a view to appraisal drilling on the South Sebuku discovery in 2010.

The discovery is located approximately 15 km from the South Sembakung gas-condensate field in the neighboring Simenggaris PSC, in which Salamander has a 21.6% interest. The partners are evaluating the potential for tying in South Sebuku to the South Sembakung gas-condensate field, which received formal development approval last year.

Heads of agreement for gas sales from South Sembakung were signed on August 4 with PT Pertamina Gas (Pertagas) and PT Medco Gas Indonesia. Under these terms approximately 20 MMscfd will be supplied over an eleven year period at a minimum price of $3/Mcf with an inflator indexed to methanol prices. The gas is to be sent to the nearby Bunyu Island Methanol plant, via. a pipeline that will be constructed by the consortium of buyers, and production is expected to commence in late 2011.

James Menzies, Chief Executive of Salamander, commented, "We are pleased to have made a discovery which we expect to lead to our second development in the Tarakan Basin. With gas sales arrangements in place, we can proceed with appraisal and development work with a view to bringing new source production on-stream in 2011. In addition, the partners have identified material exploration potential for both oil & gas in both the Simenggaris and Bengara-I licenses, through which we aim to add further value."


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