Sterling Comments on Romanian Concessions, Investment Following Dispute
Sterling has issued the following statements of facts.
Following the resolution of the Maritime Boundary Dispute between Romania and the Ukraine by the International Court of Justice (the "ICJ") on February 3, 2009, there have been media reports in Romania questioning the validity and extent of certain concessions granted to Sterling by the Romanian Government.
While it is Sterling's policy not to comment on market rumors or speculation, in light of the seriousness of the questions raised and the allegations made, Sterling is issuing the following statement of facts in relation to the company, the concession agreement and its track record of operations and investment in Romania since 1997.
The petroleum agreement for blocks XIII Pelican and XV Midia was executed on August 6, 1992, pursuant to the Law no. 64/1992 concerning the grant of facilities in order to attract foreign capital in the sector of exploration and production of crude oil and gas reserves, and was approved by Government Decision no. 570 of 1992. The petroleum agreement was awarded based on an international tender and is a contract at the titleholder's sole risk and cost. Sterling became a party to the petroleum agreement effective April 1, 1997 and is currently recognized as the titleholder under the petroleum agreement.
Due to the dispute between Romania and Ukraine concerning the delineation of the Black Sea continental shelf, on December 15, 2003 the initial exploration period was suspended until resolution of the dispute by the ICJ. It was agreed that Sterling could resume petroleum operations solely in certain portions of the contract area and maintain the suspension for other portions of the respective blocks.
In 2007 and 2008 the suspension was removed for a total area of 254 km(2), located on the Midia block, outside the area disputed between Romania and Ukraine. In this area, Sterling as title holder of the petroleum agreement, drilled three (3) exploration wells, which confirmed the existence of certain natural gas resources. Currently, the commerciality of these discoveries has not been declared to the National Agency for Mineral Resources ("NAMR"), as provided in the Petroleum Law no. 238 of 2004 and the petroleum agreement.
In the event the resources are commercial, it is estimated that the development would require further investment anticipated to exceed US $ 400 million, to be made at the sole expense and risk of Sterling and its partners, with production to start sometime in 2011 or 2012.
The petroleum agreement has been amended numerous times over the past 17 years. The last such amendment, The Eleventh Amendment, was approved by Government Decision no. 1443/12.11.2008, and was executed between the NAMR and Sterling on August 24, 2007 when no forecast could be made of the date of issuance of the decision of the ICJ or the content of such decision. The Eleventh Amendment was meant to bring the provisions of the petroleum agreement, which was signed back in 1992, in line with the current legal
provisions, mainly those related to the petroleum, fiscal and environmental matters, which would have allowed Sterling to move on to the development and production of Doina and Ana structures discovered in the Midia block, located outside the disputed area. The Eleventh Amendment took over 20 months to be approved and followed the approving process by the line ministries, as provided by the existing regulations, until final approval by the Government on November 12, 2008.
The remaining area of the Pelican and Midia blocks (in total about 3,865 km(2)) continues to be under suspension. In light of the recent decision by the ICJ resolving the long standing border dispute between Romania and the Ukraine, the removal from suspension will be discussed with the NAMR. Sterling has not been awarded any new acreage as a result of the ICJ decision. In aggregate, commencing from the date of approval of the petroleum agreement, ten (10) exploration wells have been drilled and seismic works of over 11,000
km carried out, for a total investment of approximately US$ 130 million.
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