Tri-Valley Joins with Battelle for High Impact Oil and Gas Research

Tri-Valley has signed an agreement with a unit of Battelle Memorial Institute based in Richland, Washington to conduct advanced research on low permeability oil and gas formations commonly referred to in the industry as "tight" zones and heavy oil reservoirs.

Tri-Valley has made two very large discoveries with the pay being in tight formations and not able to flow at commercial rates. Conventional industry treatment such as hydraulic fracturing and acidizing the zones has still not enabled the test wells to flow at commercial rates.

Battelle, which operates the nuclear laboratories at the Hanford Works in Washington and the Oak Ridge, Tennessee facilities, and other research facilities at other locations is also charged by the U.S. Department of Energy to find ways to reduce U.S. dependence on foreign oil and ways to enhance exploitation of heavy oil reservoirs. They have an enormous array of highly skilled scientists, technical personnel and ultra sophisticated analytical equipment to apply to technical engineering problems and Battelle works on both government and private contracts.

On the oil and gas side, Tri-Valley discovered, some 45 miles northwest of its Bakersfield, California headquarters, a potentially vast horizon of hydrocarbon bearing zones totaling in the range of 2,500 feet in thickness from 13, 000 feet to 19,000 feet and suspects additional zones to 22,000 feet. While hosting significant percentages of high quality oil and gas, the formations are quite dense and do not freely release the petroleum at commercial rates.

Mindful of the potential benefits of advanced reservoirs, Tri-Valley believes that the scientific research resources of Battelle could identify the means to treat these formations to produce commercially.

"We have met with Battelle staff and inspected the truly impressive laboratory resources. They can, if necessary, begin their research at the molecular level to examine every aspect of formation components and find whatever answers there are for dealing with the structural and chemical barriers to increasing permeability. Solving these offers potential bonanza rewards to our drilling partners, shareholders, and royalty owners as well as serving the interest of consumers on a national scale," said F. Lynn Blystone, president and chief executive officer.

On another, similar front, Tri-Valley has discovered a natural gas bearing shale area about 30 miles north of Bakersfield near the town of Delano. From all its tests the formation appears to host three times as much gas per square mile as does the Barnett Shale in north central Texas, currently the nation's hottest natural gas play. Again, the shale permeability is low (as is the Barnett Shale) and so far defies producing gas at commercial rates. Tri-Valley believes analysis by Battelle could show the way to liberate the gas for consumer use.

"Here we are in a state that uses more six billion cubic feet per day (and rising) and that produces less than one bcf per day, an import ratio of about 87%. Finding a way to liberate this shale hosted gas could have at least statewide, if not national, benefit and handsomely reward our drilling partners, shareholders and royalty owners in the process," said Joseph R. Kandle, president of operating subsidiary, Tri-Valley Oil & Gas Co.

The agreement is structured in defined task increments allowing Tri-Valley to pick and choose which tasks to pursue and which to drop since it is also continuing work on its two projects during the research in case production success could be achieved independently. For instance the Company is preparing to hydraulically fracture a different zone between 17,500 feet and 18,000 feet in its Ekho deep well to provide a comparison of frac treatment in shale versus sand formations as well as, hopefully, achieve commercial production rates.

The prizes extant in these discoveries is well worth our perseverance and we are pleased to have the services of such an august firm to join us in our quest to bring these discoveries to availability for the nation's benefit. We are determined to claim the exceptional rewards these discoveries can furnish once on commercial production," Blystone said.