New Offshore Era for Anzon-Beach JV - Gippsland Project Underway

Development of Australia's latest offshore oil field – the A$250 million Basker Manta project in the Gippsland Basin area of Bass Strait – has commenced, with first production due in October.

The project's partners – Anzon Australia Limited (62.5% interest and Operator) and Beach Petroleum Limited (37.5% with the right to acquire a further 12.5%) – spudded the Basker-2 appraisal well yesterday in the Basker oil field, 90 kilometers southeast of Lakes Entrance.

Basker-2 will deliver the first offshore production for both companies, from the end of next month, initially on test at up to 8,000 barrels of oil per day (bopd). Basker-2 is the first of at least four proposed sub-sea production wells to be drilled by the Basker Manta JV.

The project is the first innovative application of Floating, Production, Storage and Offtake (FPSO) technology in Bass Strait since development operations commenced there in the mid-1960s. Alongside the project's FPSO vessel (the "Crystal Ocean") will also be located one of the largest tankers to be permanently anchored in Australian waters for oil storage and distribution (the "Basker Spirit").

Anzon's record breaking development

"This is a dynamic southern Australian project offering a range of primarily oil but potentially gas development options in several field configurations over the short to medium term," Anzon Australia's Executive Chairman, Mr Steven Koroknay, said today.

"Achieving production approximately 10 months after listing on the ASX has to be a record breaking development," Mr Koroknay said.

"The known Basker Manta oil field production profile, followed by the planned gas development of the Manta and Gummy fields, creates a solid foundation for future growth by both Joint Venture companies. Basker Manta is our first revenue-generating cornerstone project and is clearly in line with our strategy to acquire assets where we, as the Operator, can control our destiny and returns to shareholders."

Step-change in Beach's history

Beach Petroleum's Managing Director, Mr Reg Nelson, said today the Basker Manta project start represented yet another progressive step-change for the Company as it continued to diversify and balance its exploration and production performance.

"This project will provide a much higher spread of potential revenue, production and earnings and we anticipate that our Basker Manta entitlements will lift Beach's annual production to between two and three million barrels of oil by 2007," Mr Nelson said.

"At the top end of the scale, this would triple Beach's production of just over one million barrels for the latest financial year – and rank Beach alongside the likes of AWE, Roc Oil and Arc Energy."

"Beach's onshore Cooper-Eromanga Basin oil production will remain our engine-room for the foreseeable future, but Basker Manta introduces a new balance into our development and production profile."

40-day drill schedule

The Basker Manta project (which also includes the Gummy gas field), is located in Victorian Retention Leases VIC/RL's 6, 9 &10.

The Basker and Manta fields have Proven and Probable (2P) recoverable oil reserves of 23.3 million barrels (mmb). In addition, a contingent gas-condensate resource of 19.2 million barrels of oil equivalent (mmboe) has been identified in the Manta and Gummy fields.

The semi-submersible drill rig, the Ocean Patriot, is expected to take up to 40 days to drill and complete Basker-2 to its Total Depth of 3,360 meters.

The Joint Venture has received approval for a 6 month extended production test, using the FPSO vessel, the Crystal Ocean, which is due to arrive in Melbourne later this month for final fit-out ahead of taking station in the field.

The Crystal Ocean has been contracted until at least January 2008 with an option for a total of three extensions for an additional four years on location at the fields.

Mr Koroknay said initial test rates were expected to be around 6,000-8,000 bopd, rising to around 20,000 bopd when peak production is achieved after full development in mid-2006.

Oil produced during the extended test will be transferred to the 650,000 barrel capacity and renamed Basker Spirit Aframax-class tanker (formerly the Nordic Yukon) for storage and subsequent sale.

The Basker Spirit – which has been contracted by the JV for three years - is due in Victorian waters in October. Anzon and Beach Petroleum are currently negotiating sale arrangements for Basker Manta oil – with several options including offtake into shuttle tankers at sea, or for the Basker Spirit to offload direct at a Victorian or New South Wales coastal refinery.

Beach Petroleum also owns a direct 10% interest in Anzon.

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