Oilexco Receives DTI Approval for Nicol Field Development

Oilexco has received Field Development approval from the UK Department of Trade and Industry for the Oilexco operated Nicol Field located in Block 15/25a in the central UK North Sea, 120 km North east of Aberdeen. The Nicol partnership is Oilexco 70%, ConocoPhillips 18% and Eni 12%. The field will be developed via a subsea tie back of a horizontal well via the Brenda Subsea Manifold to the CNR International (UK) Limited, a subsidiary of Canadian Natural Resources Ltd., of Calgary, Alberta, Canada, operated Balmoral Floating Production Vessel, 16 kilometers to the Northeast.

The Nicol development scheme is based on a horizontal production well, with a second well planned to commence production post first oil contingent upon reservoir performance. Artificial lift capability in the form of gas lift is included and is supplemented by a subsea multi phase booster pump having 51,000 bbl/d of fluid capacity. Current estimated cost of the Nicol development including contingency is Pounds Sterling 30 million, and will be jointly developed with Brenda, Oilexco's other operated oil development in the UK North Sea. Project Finance is provided by a syndicate of banks led by the Royal Bank of Scotland.

The development features an integrated subsea compact selector manifold that allows the Nicol well to be separately tested subsea before being returned to the subsea booster pump for onward export to the Balmoral FPV. The Brenda manifold is controlled by a fully redundant control system that utilizes fiber optic technology, through a combined controls and power control umbilical that also drives the pump. The production well will be drilled from the Transocean semi submersible Sedco 712 currently on contract to Oilexco until March 2008. The Sedco 712 will be present on the Nicol location for the development drilling phase currently expected to commence in early June. Oil will be exported subsea via the Brenda Manifold to the Balmoral FPV for processing and forward export via the BP operated Forties pipeline. The Balmoral FPV is capable of handling Nicol production for the full range of anticipated production profiles. The development schedule is aimed at drilling and completion activity during Q2 of 2006 achieving first oil in 4th Quarter 2006.

The primary contractors for the Nicol development are Technip Offshore (UK) Limited, Framo Engineering AS and FMC Technologies Ltd. Technip will provide the pipelines and perform the installation of all the subsea equipment, Framo provide the integrated manifold complete with the compact multiport manifold, multiphase metering and multiphase pumping and subsea and topside control system for the wells, manifold, meters and pumps, FMC will provide the Horizontal tree.

Additional hydrocarbon potential to Brenda exists within the area, and may be considered as future satellite development potential for the Brenda facilities. These include the up dip portion of the Brenda Field, together with 'Sheryl' leads developed within both the Paleocene and Jurassic play fairways. The development of Nicol is possible due to the availability of the Brenda integrated manifold, the crucial subsea infrastructure hub necessary to facilitate commercial development of the area. The Subsea manifold has been designed to accommodate 8 wells or flow lines to allow for-tie in of regional prospects. The Oilexco operated Nicol field is one such discovery which lies 10 kilometers to the Northwest of Brenda. The Framo subsea multiport selector and multiphase flow meter will allow future fields to be allocated correctly.

Oilexco became the most active exploration driller in the North Sea in 2004 and 2005. The Oilexco drilling program is currently booked through the 1st Quarter 2007. Oilexco's interest in the Nicol field was earned by drilling an appraisal well on the Nicol structure.

'This is the next step in Oilexco's corporate evolution' comments Arthur Millholland CEO. 'Our model of aggressive appraisal and exploration drilling, maintaining high working interests, followed by a quick and common sense approach to Field Development, will create significant value for our shareholders going forward' added Mr. Millholland. 'We look forward to continue to blaze new trails in the UK North Sea, a basin which though mature, offers significant future potential to independent operators such as Oilexco'.