Indusmin Acquires Armenian Exploration Blocks

Indusmin Energy has acquired exclusive exploratory rights on the Blocks 1 and 2 in the Republic of Armenia from Armenian American Exploration Inc., of Solana Beach, California, for a non disclosed override over twenty years term on any oil or gas discovery made. Indusmin recently applied to the Armenian Ministry of Energy for a five-year extension to the license.

AAEC, a private company, was solely owned by Allen Paulson from California, now deceased (July 2000); it is now owned by his son, Michael Paulson. AAEC originally commenced operations in the spring of 1997, acquiring 200 kilometers of seismic data during 1997-8 and drilling one well, Azat-1, to 3,524 meters by July 1998. Oil traces were encountered at about 3,212-5 meters.

Block 2, which covers the southwestern part of Armenia, including most of the Armavir, Aragatsotn, Ararat and Kotaik regions, as well as the capital city of Yerevan, contains the most prospective areas for both oil and gas in the country. To the south west of the city of Armavir, thirty kilometers due west of Yerevan, is an area where a number of gas prospects occur. Two wells, Oktemberyan-13E and Oktemberyan-7P, drilled in the 1960's, tested gas at rates of 19,000 m3/day and 900m3/day respectively; many other boreholes have gas and oil shows.

"The agreement originally signed between AAEC and the Armenian Ministry of Energy is a Production Sharing Agreement with advantageous terms. Because of AAEC's high start up costs, much of which are eligible for cost recovery, Indusmin will be entitled to 80-85% of the output of any initial discovery, dependent upon reserve size. Several prospects with reserve sizes ranging between 15 and 40 bcf, supported by both seismic and surface geochemical data, have already been identified in the Armavir area, west of Yerevan. To the east, two oil prospects -- Shorakhpur and Nubarashen -- have recoverable reserves of about twenty million barrels each," Tim Papworth, advisor to AAEC, previously General Manager.