Austral Pacific & Genesis Power to Drill Cardiff-2

Austral Pacific has signed a Memorandum of Understanding with Genesis Power to drill Cardiff-2, a deep gas well, in Petroleum Exploration Permit PEP 38738 in the onshore Taranaki Basin, New Zealand.

Genesis Power, a New Zealand State Owned Enterprise, is the leading generator and retailer of electricity and gas in New Zealand, with assets valued at NZ $1.2 billion and revenue for the financial year ended June 2003 of NZ $1.4 billion. Genesis owns seven power stations including New Zealand's largest thermal plant, Huntly Power Station; and plans to build another major thermal power station in the near future.

Austral has entered into commercial arrangements with Genesis, whereby Genesis will fund the drilling and flow-testing of the Cardiff-2 appraisal well to acquire a 40% equity interest in respect of the deep petroleum rights in Petroleum Exploration Permit 38738, and associated rights to purchase all deep gas. These arrangements are subject to finalization of contracts. Austral Pacific and its present partners will retain all rights to shallow petroleum in PEP 38738, including the Cheal field and similar prospects.

The Cardiff-2 well will target a number of sandstone reservoirs within the Kapuni Formation below 4,000m (13,000 feet). The Cardiff Prospect is defined as a deep structure covering an area of more than 20 sq km (5,000 acres) within PEP 38738; and Cardiff-1, drilled in 1993, encountered gas bearing sandstones over an interval of nearly 600m (2,000 feet) within this structure.

Announcing the signing of the Memorandum of Understanding, Austral Chief Executive Dave Bennett said that these commercial arrangements will result in the Cardiff-2 well being drilled and tested later this year. Dave Bennett and Genesis Chief Executive, Murray Jackson agreed that the application of modern drilling and testing techniques may establish substantial amounts of new gas here and elsewhere in the Taranaki Basin. The proximity of the Cardiff Prospect to existing gas infrastructure should result in a fast track development, in the event that commercially recoverable reserves are established.

Dave Bennett said, "We are pleased to have entered into this arrangement with Genesis Power. We believe this deep gas prospect has enormous potential for both companies."