Norwest Endorses AWE View of Perth Basin Potential

Norwest has endorsed the view that A W E Limited has for the shale gas potential of the Perth Basin announced by the company 0n 9 November 2010.

NWE also shares the same view of AWE that “the commercial drivers in the Perth Basin could allow this shale gas opportunity to provide Australia’s first commercial venture in the growing global phenomenon of “unconventional” Shale Gas production.” In fact Norwest has had such a view since the early part of 2010 which has been reflected through its asset dealings
in EP413 during the course of 2010.

Norwest has announced on several occasions that the Perth Basin is located in close proximity to the Dampier to Bunbury, and Parmelia gas pipelines that feed the South West domestic market. There is strong demand for gas in the Western Australia market that is underpinned by a domestic gas price of $8 or more, per thousand cubic feet (mcf) all of which augers well for
Perth Basin shale gas players.

The AWE announcement refers to the overall acreage equity of AWE in the Basin including EP413.

Importantly Norwest currently holds a 55.606% interest in EP413 that is one of the key permits in the Basin. Norwest is the operator of the EP413 joint venture. AWE holds a 44.252% interest with the remaining 0.142% being held by a private party.

Norwest has an agreement with Indian Government explorer Bharat PetroResources Limited to earn 50% of Norwest’s 55.606% interest by providing $10m in exploration and drilling funds to drill a well on the permit to evaluate the shale gas potential.

NWE CEO Peter Munachen said that Norwest shareholders are well positioned to exploit the potential upside of a major shale gas discovery.

“Norwest has the acreage and the funding. With a highly prospective permit, and with Bharat PetroResources as a farm-in partner, we see this as a company making opportunity. Success here will have a significant and material impact on Norwest,” Mr Munachen said.

The geology of EP413, consistent with the geology of the Perth Basin, contains the important three shale sequences that AWE refer to in their announcement, the Carynginia, the Koctatea and the Irwin River Coal measures.

Norwest’s review of the data suggests that around 40% of the total EP 413 permit area of approximately 125,000 acres, has the potential for the presence of shale that have the right characteristics to produce gas.

In the 1960’s Arrowsmith -1 well drilled in EP413 and located 25kms from Woodada Deep - 1, was estimated to produce gas at rates as high as 4 million cubic feet per day from the Caryinginia without fracture stimulation, before subsequently declining.

Norwest as operator together with AWE intend to drill Arrowsmith – 2 in Q2/2011 to test the potential of the shale in the Arrowsmith area. The company is in advanced discussion with Weatherford to contract Rig 826 (subject to availability) to drill Arrowsmith-2, aimed at commencing in April 2011.