Coastal Gets Go-Ahead for Songkhla Field Development

Coastal Energy has received government approval of its Environmental Impact Assessment ("EIA") for the 75 square kilometer Songkhla production area in the Gulf of Thailand.

The EIA approval, in conjunction with the Production Area Application which was approved in June 2008, will allow the Company to proceed with the installation of permanent production facilities and continue the development of the Songkhla field as planned.

Randy Bartley, Chief Executive Officer of Coastal Energy commented, "The receipt of our EIA approval is a major milestone for the Company. It allows Coastal to install production facilities once drilling is complete and proceed with developing the Songkhla field as planned. It is also a testament to Coastal's continued commitment to being an environmentally proactive company. We have instituted measures such as zero-discharge drilling to mitigate environmental issues. Songkhla is one of the first near-shore oil developments in the Gulf of Thailand, and we are committed to making it a safe and environmentally conscious operation."

Field Development

Coastal own 100% and operate block G5/43, an 8,500 square kilometer shallow water (less than 25m water depth) block in the south western portion of the Gulf of Thailand. The largest of the four basins, the Songkhla basin, located in the southern part of the block has been the focus of activity since the area was first explored over 20 years ago. The Company's near term focus is on exploiting the value from four oil discoveries made between 1988 – 1996 when five exploration wells were drilled resulting in four oil discoveries. Coastal acquired the block from the government of Thailand in 2003 and in 2005 drilled an additional three wells on the Bua Ban field, one of the previously drilled discoveries. All three wells confirmed oil within the main Oligocene sandstone reservoir.

A 330 square kilometer high resolution 3D seismic survey acquired in early 2007 has enabled the Company to complete a detailed technical evaluation of the Bua Ban field and in addition, confirm drilling locations for several untested prospects including two unappraised discoveries, Benjarong  and Songkhla SW.

In August 2008, NuCoastal (Thailand) Limited, a wholly owned subsidiary of Coastal Energy Company signed a Letter of Intent (LOI) with Premium Drilling for a three-month charter of the newbuild jackup rig Deep Driller 7. The LOI allows for an extension of up to an additional three months.

The rig, a Baker Marine Pacific Class 375, spudded the Songkhla A-01 development well in early October. This is the first of four (4) wells in the Company's development program of the Songkhla field located in Block G5/43 offshore Thailand.

The well has now been drilled to a total measured depth of 9,025 feet (2,750 meters) and logged approximately 125 feet (41 meters) of net pay with 20% porosity in the Lower Oligocene primary reservoir, approximately 53 feet (16 meters) more net pay than encountered in the original well, which was measured at 82 feet of net pay with 19% porosity by Huddleston & Co, Inc.

Following the initial flow test, an extended production test began on 3 November, 2008 and is expected to last through December. The well is currently producing in excess of 4,500 barrels of oil per day with no water production using an Electric Submersible Pump ("ESP"). The oil is a medium sweet grade with API gravity of 29 degrees and 0.24% sulfur content and will initially be marketed to a local Thai refinery.

 Another Lower Oligocene pay zone, not seen in the original well, was encountered above the two previous known pay zones. This interval added an approximate additional 15 feet (4.5 meters) of pay that is 160 feet (49 meters) structurally higher than the previously known pay zone in the original well.

In addition the Songkhla A-03 well was spud on 2 November, 2008 and is currently drilling the 8 ½-inch hole section. Songkhla A-03 is the second in the development of the Songkhla field. The well is expected to be drilled to a total depth of approximately 7,900 feet (2,408 meters) true vertical depth.

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