Anzon's Basker, Manta Fields Reach 7,550 BOPD Production in Q2

Anzon Energy Ltd. has issued a production and exploration activities report for the second quarter ended June 30, 2008. 

Production:

• Oil production from the Basker and Manta fields (100%) during the second quarter averaged 7,550 barrels of oil per day, which includes scheduled maintenance downtime and logistical downtime during crude sale offtakes.
• In the second quarter of 2008 the BMG Joint Venture sold approximately 567,000 barrels of crude oil, resulting in US$67 million in gross sales revenue with an average realised price of US$118 per barrel.
• On 30 July 2008, total production from the Basker-Manta fields exceeded 5 million barrels (including EPT production).

Development Projects:

• In July 2008, the Basker Manta Gummy (BMG) Joint Venture (JV) announced its intent to move forward on a major expansion of its Oil & Gas Development in the Gippsland Basin (Vic L26, L27 and L 28).
• In July the BMG JV signed a Letter Of Intent (LOI) with BW Offshore AS (BWO) for the design, conversion, installation and operation of a purpose built Floating Production Storage and Offloading vessel (FPSO) of Suezmax size (850,000 barrels), which will have the capability to handle higher oil, water and gas rates than the present Crystal Ocean and Basker Spirit system.
• The BMG JV entered into a LOI to contract the semi-submersible drilling rig Songa Venus for commencement of drilling in Dec this year for between 120 to 150 days.
• As at July 29, the installation of the flowline to connect Basker 6st to the Basker manifold has commenced. Additional production is expected from the end of August.

A. PRODUCTION & DEVELOPMENT ACTIVITIES

Basker-Manta Oil Development (VIC/L26)

(i) Project Update
Oil production for the quarter amounted to 687,009 bbls, an average daily production rate of 7,550 bopd, which includes scheduled maintenance downtime and logistical downtime during crude sale offtakes.

On July 30, 2008, total production from the Basker-Manta fields exceeded 5 million barrels (including EPT production).

(ii) Oil Marketing
In the second quarter of 2008, the BMG Joint Venture sold approximately 567,000 barrels of crude oil, resulting in approximately US$67 million in gross sales revenue with an average realised price of approximately US$118 per barrel.

In July 2008, the BMG sold a further 597,000 barrels resulting in net sales to Anzon of around A$32.5 million.

At this point in time marketing of the crude has continued on a "spot" basis. Longer term "firm" off take arrangements continue to be reviewed. Crude Oil sales remain at a premium to the APPI Tapis Oil marker, which continues to be at a premium to the WTI marker.

B. DEVELOPMENT PROJECTS

On July 7, 2008, the Basker Manta Gummy (BMG) Joint Venture (JV) announced its intent to move forward on a major expansion of its Oil & Gas Development in the Gippsland Basin (Vic L26, L27 and L 28).

On Friday July 4th, the JV signed a Letter Of Intent (LOI) with BW Offshore AS (BWO) for the design, conversion, installation and operation of a purpose built Floating Production Storage and Offloading vessel (FPSO) of Suezmax size (850,000 barrels), which will have the capability to handle higher oil, water and gas rates than the present Crystal Ocean and Basker Spirit system. This new single vessel will replace the combination of the mini FPSO and shuttle tanker that has been the trademark of the innovative Basker Manta development since it started up 2.5 years ago and has now produced nearly 5 million barrels of oil.

Since the original development was conceived (Crystal Ocean/Basker Spirit) in 2005 the BMG oil reserves have increased plus a substantial gas resource has been delineated. This has enabled the JV to justify a larger facility, capable of processing gas and providing a more optimal, unconstrained development including:

1. A forecast doubling of current oil rate to around 20,000 bopd.

 2. The offshore processing of gas (capacity 120 MMscfd) to sales quality for transport by high pressure pipeline 90 km to the onshore Eastern Gas Pipeline (EGP) or reinjection into the reservoir for later production.

3. The offshore ship to ship transfer of liquids, eliminating logistical downtime.

4. An environmentally responsible development with zero flare discharge and nearly zero onshore "footprint."

5. Improved reliability including redundant equipment.

The operating Lease Contract for the FPSO is expected to be finalized before the end of September 2008, and commissioning in Bass Strait is expected 2nd quarter 2010.

In addition, the BMG JV has entered into a LOI to contract the semi-submersible drilling rig Songa Venus for commencement of drilling in Dec this year for between 120 to 150 days. This rig will supplement the Maersk Kan Tan IV which will commence in May 2009, a 135 day drilling program. In total, between the two rigs, some 4 development wells (Basker, Manta and Gummy) targeting both Intra-Latrobe and Golden Beach sands, and possibly 1 or 2 appraisal/exploration wells, will be drilled. These wells are planned to be connected via manifolds and risers to the FPSO via a newly installed disconnectable Submerged Turret Production (STP) buoy and mooring attached to the New FPSO.

In aggregate the Joint Venture is planning to spend up to A$1230 million dollars on drilling, completing and subsea connections including manifolds and pipeline, while the new FPSO, in which BWO is investing approximately US$400m inclusive of its gas processing facilities, will be leased for an initial period of 5 years plus options to extend the contract for up to a total period of 15 years. BWO will effectively provide all services; including the vessel, operations and maintenance.

The BMG Project is a Joint Venture between:

• Anzon Australia Limited 40% (Operator)
• Beach Petroleum Limited 30%
• CIECO Exploration and Production (Australia) Pty Limited 20%
• Sojitz Energy Australia Pty Limited 10%

(iii) The BMG Joint Venture holds three production licences in the Gippsland Basin. Oil production commenced from VIC/L26 in 2005, with the Full Field Development coming on line in December 2006. VIC/L27 and VIC/L28 provide for the development of the known gas resources and exploration of further hydrocarbon potential in the acreage.

Potential exists for additional hydrocarbon accumulations in the intra-latrobe and Golden Beach formations within the company's production licences. Geophysical and geological studies by Anzon have identified at least 4 leads which are presently being matured for potential drilling in 2009 or later. Reprocessing of the 1996 Basker-Manta 3D seismic survey has been completed and is being used to mature the leads previously identified.