Austral Finalizes Deal with Genesis Energy

Austral Pacific Energy Ltd reports that the last item outstanding on the previously advised deal with Genesis Energy, has now been concluded with the receipt on Tuesday 27 July of the New Zealand Minister of Energy's consent to these agreements.

Genesis is, therefore, now a permit holder with Deep Petroleum rights in the PEP 38738 permit in New Zealand's onshore Taranaki Basin. Interests in the PEP 38738 Deep Petroleum joint venture are now: Austral 25.1% (Operator), Genesis Energy 40%, IRM 19.8%, Cheal Petroleum 15.1%.

As per the Austral release of April 28th, Genesis is to fund the drilling and testing of Cardiff-2 and has entered into a gas sales agreement with the other participants. Drilling contracts are being finalized to employ the Parker Rig 246 to drill Cardiff-2.

It is expected that the Cardiff-2 well will commence around November this year, when this rig has completed its present commitments to other parties. Cardiff-2 will test the deep gas potential of a large structure from which previous wells have produced gas, but which has remained undeveloped.

The separate PEP 38738 Shallow Petroleum joint venture, which holds rights to Cheal and other similar targets in PEP 38738, is comprised of Austral Pacific 36.5% (Operator), IRM 33% and Cheal Petroleum 30.5%. An initial production test of the Mt Messenger pay in the Cheal-A3X well has now been completed, and a pressure survey is underway.

During the 30 days of production test of the lower (Mt Messenger) pay, on a range of choke sizes, a total of 6,972 barrels of oil and 4.96 million cubic feet of gas was produced, with no recognized formation water. The oil is a light sweet waxy crude, with API gravity of 38 degrees; and has been transported to the nearby Waihapa oil production station, where it has been sold to Swift Energy.

The gas is very rich in LPG's (propanes and butanes) which also have good sales value. Following the pressure survey, preparation to test the shallower Urenui pay zone is now underway. It is then planned to flow both Mt Messenger and Urenui pay zones together to establish an optimal flow regime.

The Shallow Rights joint venture will shortly place an order for pipeline sufficient to connect the gas to nearby gas processing infrastructure; and anticipates pipeline construction in the next few months. A further well, Cheal-A4, is currently being considered for near term drilling.

In offshore Western Australia, Austral Pacific's Australian subsidiaries have now transferred their combined 50% interest in AC/P26 to current participant Hardman Resources Ltd, in exchange for the grant of an option to participate in the drilling of the Anson West Prospect, when and if drilled by Hardman. The Company also no longer has an interest in AC/P31, in this same area.

The Kahili gas condensate field in PEP 38736 (Austral 45%, Operator) is near to commencement of production, with NGC (the purchaser of Kahili gas) advising that gas is scheduled to commence flow down the purpose built Kahili pipeline by mid August 2004.

CEO Dave Bennett said, "The positive progress on all of Cardiff, Cheal and Kahili projects is positioning Austral to rapidly build its production revenue base and reserves position. We welcome Genesis into the exciting Cardiff project, where the upside potential for all participants is excellent."