Indo-Pacific Nearing Completion on Kahili Development Study

Indo-Pacific Energy reports that the Kahili Development Study is near completion. There have been positive responses regarding willingness to purchase gas and indicating gas prices from all parties approached. Two favored options are being further analyzed before recommendations are finalized. The schedule remains to bring the Kahili gas-condensate discovery into production by mid year.

New Zealand is a very heavy user of gas, per head of population. Supply over the last twenty years has been dominated by cheap gas from the giant offshore Maui field. This supply is now becoming restricted as Maui enters into decline; and over the last year demand for new gas has strengthened rapidly, and will continue to do so.

The onshore Taranaki offers good potential for the discovery of small to medium sized gas fields. Indo-Pacific is excellently positioned, via its extensive onshore acreage position, to find further fields of this type. Indo-Pacific's Cheal project offers the opportunity to bring gas production on stream in the near future. Cheal-1 and Cheal-2 both produced gas and oil when tested in 1995; but at the time there was no market for the gas. Now, the combination of high oil prices and the certainty of gas market at ever strengthening price, together with cheaper drilling costs, provide the basis for appraising the Cheal field for development.

The Cheal wellheads have now been excavated, and Cheal-1 will be opened later in February, to make connection with the gas and oil sands originally tested, plus an additional untested gas sand above the original test zone. The well will be flow tested for up to a month on each zone, in order to verify its ability to flow in a sustained manner and to identify whether sufficient reserves can be proved to justify development. In the event of a successful test, Cheal-2 will also be tested, and consideration given to further drilling within the 750 acre potential extent of the field.

Cheal is situated less than four miles from each of Swift Energy's Waihapa treatment station, the Stratford gas fired power station and the town of Eltham, where industrial demand is well matched to likely Cheal supply. Successful testing will lead to a near term development of the field, and associated revenue generation.

As previously reported, INDOF's 100% (on sole risk) Goldie-1 well remains shut-in pending the March/April court case with Greymouth Petroleum. Oil revenue foregone by Indo-Pacific is estimated in excess of US$200,000 per month. This is the subject of a counter-claim by Indo-Pacific subsidiary, Ngatoro Energy Ltd, against Greymouth Petroleum. The planned water flood of the Ngatoro-A oil pool (INDOF 5%), to increase oil recovery, has now been delayed since May last year by the unwillingness of Greymouth to approve that program. Testing of the interpreted oil zone in the Tabla-1 well, drilled last December in the same permit, also still awaits Greymouth agreement. Greymouth Petroleum is a private New Zealand company of whom the principals are Mr. J. Sturgess and Mr. M. Dunphy.