Bengal announced that its wholly owned subsidiary, Bengal Energy International ("BEII"), received the official award of India Block CY-OSN-2009/1 (the "Block") at a formal signing ceremony with the Government of India ("GOI"). The Block had been provisionally awarded during the New Exploration Licensing Policy ("NELP") VIII bid round in the fall of 2009. The Production Sharing Contract ("PSC") between BEII and the GOI sets out the terms and conditions for the exploration and development of the Block. It is situated in the Cauvery Basin in SE India and encompasses 1,362 square kilometers (approximately 340,000 acres). BEII holds a 100% interest in the Block and is the operator. The Block is located from seven to 16 kilometers offshore with approximately two-thirds in water depths of less than 100 meters.
The Company has already identified a large seismically-defined geological structure within the Block from a detailed technical review of existing 2D seismic data. The areal extent of the structure is approximately 18,750 acres. The Company plans to acquire and evaluate 3D seismic data over the structure to better define the opportunity and develop a follow-up drilling program. Oil companies within 50 kilometers of the Block have committed to spend in excess of $200 million on exploration over the next four years. The Cauvery Basin is an active producing basin covering an area of around 250,000 square kilometers and currently has 28 producing oil and gas fields.
The winning bid requires BEII to acquire 310 kilometers of 2D seismic data and 81 square kilometers of 3D seismic data during the first four years of the seven-year exploration phase of the Block. The committed work program capital expenditure is estimated at US$2 million (approximately $6/acre). Drilling will be required to hold the Block after the first four years of exploration is complete. There is a seven-year tax holiday from the start of commercial production.
With 16% of the global population, India is the fourth largest consumer of primary energy and the fourth largest economy in the world. With its per-capita energy usage at only 10% of the average consumption of the world's three biggest energy users, India's energy appetite is projected to demonstrate continued robust growth. The history of the oil industry in India goes back to 1889 when oil was discovered in Digboi in Assam, NE India. India's oil and natural gas resource base is spread over 3 million square kilometers of sedimentary area in 26 sedimentary basins. Based on current production statistics, approximately 64% of India's crude oil production and 98% of natural gas production comes from the country's offshore acreages. India currently has the most land rigs of any country outside of North America and has the fourth largest fleet of offshore rigs.
With the official award of the Block, the Company has created a platform for significant growth in its core areas. Having been granted four large exploration blocks at international bid rounds in proven, producing basins in onshore and offshore India and Australia in the past two years, the Company has increased its undeveloped land position by 250% to 2.3 million net acres, and has evolved dramatically from a primarily non-operated land base to operating 87% of its net acreage. The size of Bengal's undeveloped land base in India and Australia now surpasses the 2009 acreage of every publicly traded junior and intermediate oil and natural gas company operating in Western Canada. Bengal is positioned to drill up to six wells in the next 12 months and has active seismic programs to advance its plays and prospects to future drill locations.
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