Korean Majors Farm-in to Amity's Whicher Range Field

Amity Oil and it's partner GeoPetro Resources have entered into a major farm-in agreement with Korea National Oil Corporation and Seoul City Gas Company Ltd that will see the two Korean companies commit up to $6.7 million for exploration of the Whicher Range Gas field.

The deal will see KNOC and SCG earn a 20% and 15% interest respectively in Exploration Permit EP 408 by conducting and co-funding exploration activities, and drilling one new well at the Whicher Range field, located in Western Australia's southwest, in the onshore Perth Basin.

KNOC is Korea's State-owned oil and gas exploration and production company, with extensive international interests, including production in the Middle East, South America, Europe, Africa and Asia. SCG, a publicly listed company, is the second largest gas distributor in Korea and currently supplies over one million customers across Korea. The Whicher Range deal represents both companies' first venture into Australia.

Whicher Range is strategically situated close to existing markets and has an in-place gas resource in excess of 3.7 trillion cubic feet. The field is a 'tight gas' reservoir and has not yet been developed due to uneconomic gas flow rates from the low permeability sandstone reservoir. Similar tight gas reservoirs in the United States produce 17% of the nation's domestic production, from over 80,000 wells.

Amity Oil Executive Director Peter Allchurch said: "Analysis of the extensive data collected from the first four Whicher Range wells has shown that drilling operations significantly damaged the reservoir and subsequently reduced the gas flow rate from the wells.

"In the upcoming Whicher Range-5 well, the joint venture will use underbalanced air mist drilling, a proven technique that has been used successfully on tight gas reservoirs in North America and Australia. This technique will prevent damage to the reservoir and provide the best possible access to Whicher Range's enormous gas resource," he said.

The Whicher Range field is located in an existing high-growth, deregulated gas market of 600 terajoules per day. Mr. Allchurch said the field's location means that Whicher Range gas would not be subject to the $1.11 per gigajoule pipeline transport cost placed on North West Shelf gas, which will give the Joint Venture a significant competitive price advantage.

"The joint venture believes that most customers and the State Government would welcome the security that an alternate gas supply would provide industry and domestic consumers.

"In addition, there are several major mineral refining and petrochemical projects in the region waiting for a less expensive gas supply, with many existing contracts due to expire in the next five years," he said.

The new Joint Venture interests are: Amity with 47.957%; GeoPetro with 17.043%; KNOC with 20.000%; and SGC with 15.000%.