Bligh Spuds Well Offshore China

Bligh Oil & Minerals reports that the Wei 6-12-1 well spudded on March 1, 2002 by the CNOOC Services Ltd. jackup, Nanhai IV. The well is being drilled on Block 22/12 located in the Beibu Gulf, offshore southwest China in 92 feet of water. The Wei 6-12-1 prospect is an untested structural closure, defined by 3D seismic control, which is located 6 miles east of the 12/1-1 producing field complex, and less than 3 miles from existing accessible pipeline facilities. Mean potential reserve estimates are in excess of 100 million barrels of oil, with the primary target being the Weizhou formation, anticipated in the interval from 4,593 feet - 5,741 feet. The well is expected to reach this depth in about 10 days.

Bligh has a 40% working interest and is operating the well on behalf of a consortium of four Australian companies. Bligh's co-venturers are earning their interests in the Block by collectively paying 60% of the costs of drilling the Wei 6-12-1 well to an initial depth of 5,741 feet. In the event that the well is a discovery, or at least offers sufficient encouragement, the farminees may exercise the option to continue in the Block by providing Bligh with a total amount in the order of up to US$1.8 million (if all farminees elect to continue). This payment reflects a reimbursement of Bligh's pre-drill costs and pre-payment of some of Bligh's future permit administrative costs.

In the event of a commercial development, the China National Offshore Oil Corporation has the right to back-in for up to a 51% working interest, to be acquired from all participants on a prorated basis. (In this situation Bligh's interest would reduce to 19.6% and the remaining co-venturers to a combined 29.4% interest). It should be noted that the Petroleum Contract relating to Block 22/12 requires CNOOC to pay its share of development costs and offers effective terms for cost recovery to Bligh and its co-venturers.

Commenting on the well, Bligh's CEO, Mr Brent Emmett said: "We are delighted that drilling is underway, that our team in charge of operations is well prepared and that operations are going smoothly so far. The prospect, with recoverable reserves potential in excess of 100 million barrels of oil, is an exciting one for Bligh shareholders and our Australian co-venturers. There are other prospects on Block 22/12, as well as discovered oil accumulations, and we regard these as potential targets for development. The combination of nearby infrastructure, existing discoveries plus good fiscal terms has great appeal."