AWE Joins Shell in New Zealand Oil Exploration

Australian Worldwide Exploration Limited has signed an agreement with Shell Exploration NZ Limited to increase AWE's participation in exploration of the prospective oil fairway in the western Taranaki basin.

The transaction, which is subject to joint venture and governmental approvals, involves a two stage process.

Stage 1 – Firm commitment
AWE will fund Shell's 60% share of a 300 kilometer 2D seismic program in the western Taranaki basin permits in exchange for a 10% interest in PEP 38481 and PEP 38482.

Stage 2 – AWE Option
Following the successful acquisition and interpretation of the seismic, AWE has an option to elect to fund Shell's remaining 50% interest in an exploration well in either of the two permits to earn a further 30% equity in both permits. This will bring AWE's equity in the two highly regarded permits to 40%. As a condition to the agreement, AWE must elect to participate in drilling the well by December 2005.

Acreage Position
PEP 38481 and PEP 38482 are contiguous permits in the western Taranaki basin, immediately north and west of the Tui Area oil discoveries (where AWE already has a 20% joint venture interest). The two permits cover a gross area of approximately 4,282 square kilometers, which increases AWE's acreage position in the region by some 27%

The permits are prospective for oil and gas within the lower part of the Palaeocene Kapuni Group, including the Kapuni "F" sandstone reservoir. Historically, the nearby Maui field has produced approximately 200 million barrels of oil and condensate, with the oil being produced mainly from the "F" sand interval. Additionally, the nearby Tui Area development is planning 20- 30 million barrels of oil production from this same reservoir interval.

The current holders of PEP 38481 and 38482, prior to AWE's earned interest, are Shell (60%), OMV New Zealand Limited (25%) and Todd Petroleum Mining Company Ltd (15%).

Commenting on the transaction, AWE's Managing Director Mr.Bruce Phillips said:

"This is further confirmation of AWE's commitment to exploration in New Zealand and is commensurate with our view of the petroleum prospectivity of the Taranaki basin.

"Since AWE's listing in 1997, we have been positioning the company to gain greater participation in the most exciting exploration plays in New Zealand. This transaction is another positive step in that direction and follows our recent announcement of increased equity in the nearby Hector area (in the adjacent PEP 38483) in conjunction with our alliance partner, Mitsui.

"The completion of this latest transaction with Shell will result in AWE holding equity in four contiguous permits in the western Taranaki basin. These permits cover most of the highly prospective oil trend highlighted by AWE's recent discovery of the Tui, Amokura and Pateke oil fields (these fields are currently progressing through the Front End Engineering Design stage for commercial development by AWE and its PEP 38460 co-venturers).

"As a result of the Mitsui and Shell transactions, AWE may be participating in up to 5 high impact exploration wells offshore NZ in the next 12 months, making AWE one of the most active exploration drillers in the country. In addition, we expect to also be undertaking the development drilling activity for the Tui Area oil fields, subject to a successful development decision later this year.

"With a strong acreage position, an exciting exploration program and high caliber partners, we are optimistic about our growth opportunities in New Zealand."