Kalrez Energy Makes Discovery on Bula Field

Kalrez Energy spudded the development well 89-K-5 on December 31 2002 in the Bula Tengarra Region of the Company's wholly owned Bula field on Seram Island in Eastern Indonesia.

The well has reached a depth of 344.74 mKB, with drilling currently suspended. Current operations are conditioning mud for electric logging of the open hole section from 61.5mKB to 344.74mKb.

After registering oil shows in the interval 132.5 – 140mKB, further shows were recorded in the interval 222.5 – 244.75mKB, with good oil shows from 232.5 – 237.5 mKB and excellent shows from 242.5 – 244.75mKB. At this depth influx of oil and gas was significant and drilling suspended whilst mud weight was increased to 11PPG.

Following electric logging 7" casing will be run to approximately 220mKB (to be confirmed from electric log data). After setting 7" casing, the zone 220-244.75 mKB will be under reamed and subject to results the well may be deepened until a change of lithology from the current sandstone.

The initial results are pleasing and confirm the potential for further development in the Bula Tengarra region. A further well will be drilled in this region immediately following the completion of 89-K-5.

While it is expected that the well will be completed successfully as a producer, it should be understood that there have been previous difficulties associated with completions of similar wells in this region.