Beibu Gulf Appraisal Well Confirms Oil

The Wei 12-8-3 appraisal well in Block 22/12 in the Beibu Gulf, offshore China, has confirmed a 11 meter gross oil column with a 100% net oil pay, slightly thicker than the pay in the discovery well drilled in 1994 some 800 meters to the south.

The Wei 12-8-3 appraisal well has reached a Total Depth of 1,378 meters. Key wireline logs have been run and two cores have been cut in the reservoir and associated section. Currently, wireline operations are being completed prior to acquiring a 3D-VSP seismic survey which is believed to be a "first" for the Asian-Australian region.

The Wei 12-8-3 well is located in 33 meters of water 830 meters north of the 1994 Wei 12-8-2 discovery well which flowed 2,355 BOPD from the Miocene Jiaowei Formation via a downhole electric submersible pump.

Information collected while drilling Wei 12-8-3, together with the preliminary interpretation of initial wireline log data, the partial examination of two cores cut through the reservoir section and initial analysis of fluid samples, confirm an 11 meter gross oil column in the Jiaowei Formation, all of which is net oil pay. Top reservoir came in essentially on prognosis, approximately 3 meters high to the discovery well. Reservoir quality is excellent with an average porosity above 30% and inferred multi-darcy permeabilities. The Oil-Water Contact ("OWC") is consistent with the contact established in the discovery well. At, and just below, the OWC in Wei 12-8-3 there appear to be some thin streaks which display much lower permeabilities and which hold out the possibility that they may act as "aquatards" effectively reducing the rate of water coning should the field be brought on to production. Preliminary, on-site, viscosity measurements indicate a highly viscous oil. Although this is, again, broadly consistent with data from the discovery well, the measured viscosity in the current well is higher than pre-drill expectations which had been based on a reinterpretation of the balance of interpretive evidence from the discovery well. Wei 12-8-3 also encountered oil shows in top basement which will be subject to further post-drill analysis.

Subsequent to finishing operations at the current well the rig will move to drill the third well, which will also be the first contingent well, in this two to five well drilling program. That well, Wei-12-3-4, will be a down dip appraisal of the 1982 Wei 12-3-1 oil discovery which flowed 36° API oil at 1,380 BOPD from the Weizhou Formation. It is expected that Wei 12-3-4 will start drilling towards the end of this week approximately 2 km north of the current Wei 12-8-3 location.

As previously advised, regardless of the results obtained, the Wei-12-8-3 well will be plugged and abandoned in accordance with the pre-drill program.

The Block 22/12 Joint Venture consists of Roc Oil as operator with 40%: Horizon Oil with 30%; Petsec Energy with 25% and Oil Australia with 5%.

In the event of a commercial development within Block 22/12 the interests held by the current joint venturers may reduce on a pro-rata basis by up to 51%, assuming that CNOOC exercises its right to participate for up to a 51% equity level in the development.

Commenting in the results of the Wei-12-8-3 well ROC's Chief Executive Officer, Dr John Doran stated that:

"Compared to the discovery well, this latest well has a somewhat thicker oil column, even better reservoir quality, the same oil-water contact and more clearly defined potential aquatards at the base of the oil column – all of which may be viewed as being encouraging. However, the results also seem to confirm the highly viscous nature of the oil and that is now regarded as the main challenge facing the Joint Venture as it tries to determine if this field can be used as the cornerstone development for this very oily area. Getting to grips with the viscosity issue will be the key focus for our post-drill technical studies".