Oilex Increases Stake in Three Indian Fields

Oilex NL has acquired an additional 15% interest in the Cambay Field and 40% in each of Bhandut and Sabarmati Fields onshore Gujarat, from Niko Resources Ltd subject to the approval of the Government of India. Each of these fields is producing oil at low rates on an intermittent basis and they are anticipated to be good candidates for re-development.

In all of these joint ventures, Oilex is the Operator and its co-venture party is Gujarat State Petroleum Corporation Limited (GSPC). Oilex has received all approvals necessary for the initial farmin on GSPC and Niko for 30% equity in Cambay Field, subject to formal amendment of the Production Sharing Contract (PSC).

The Cambay, Bhandut and Sabarmati fields are located in one of the most prolific petroleum provinces onshore India close to existing pipeline and industrial infrastructure and with the purchase from Niko of the additional 15% equity in Cambay and the 40% participating interest in the Bhandut and Sabarmati PSC's, Oilex is well placed to develop a production base in Gujarat at the earliest opportunity.

Oilex will become the Operator under the existing PSC and Joint Operating Agreement and in consideration of the assignment by Niko of its interests and adjustment for Niko's share of the original farmin, Oilex will pay an amount of US$5.49 million which will be due when approval of the Government of India is received. This amount is equal to the proportional value of the costs incurred by GSPC and Niko in the past that have not been recovered under the cost recovery provisions of the PSC.

The fields were all discovered and developed initially by Oil & Natural Gas Corporation (ONGC) of India. Hydrocarbons were found in Oligocene and Eocene sandstones and continued to be produced on an intermittent basis after the fields were acquired by the GSPC and Niko Joint Venture in 1995. Production from the fields has suffered because of sand and water influx and decline in reservoir pressure most likely due to formation damage. Oilex has undertaken geological studies of existing well data and is planning a phased seismic acquisition and drilling program to commence in May-June of this year.

Oilex will be operator of Cambay field with 45%; Bhandut with 40%; and Sabarmati with 40%.