Beach joint venture contracts purpose-built vessel for first offshore Gippsland well

Beach Petroleum Ltd. has advanced preparations for its first potential offshore oil production with the signing of the specialist vessel, the Crystal Ocean.

Dec 17th, 2004

Beach Petroleum Ltd. has advanced preparations for its first potential offshore oil production with the signing of the specialist vessel, theCrystal Ocean.

The company announced today that theCrystal Ocean FPSO had been contracted for two and a half years to process oil production from the Basker and Manta fields in the Gippsland basin in Bass Strait.

The deployment of theCrystal Ocean to the field 150 km southeast of Orbost, will be subject to the successful drilling of the Basker-2 appraisal well next May under a joint venture comprising Anzon Australia Ltd., who serves as operator with 75% interest, and Beach Petroleum 25%.

The joint venture has already contracted the semisubmersible drill rig, theOcean Patriot to drill Basker-2 in May next year. This operation will likely take about a month.

While Beach is also scheduled to participate in the drilling of offshore wells in Western Australia next year, the more advanced Basker and Manta fields are potentially its first offshore revenue contributor. This is additional to its producing oil in the Cooper-Eromanga basin.

"The signing of theCrystal Ocean is a key step forward in the schedule to complete test work on the Basker field with a view to moving immediately to first commercial production," Beach Petroleum's Managing Director, Reg Nelson, said.

"It is intended that the FPSO be used initially for an extended production test of Basker-2 as opposed to that well being restricted to short duration testing using the well's drilling rig equipment," Nelson said.

"If the extended production testing proceeds as expected, then further wells will be drilled and tied into theCrystal Ocean late in 2005 and early 2006," he said.

"This will allow the development of the Basker and Manta fields to proceed in a staged manner, reducing the upfront risk and delivering Beach during 2005-2006, its first revenue streams from offshore oil production."

TheCrystal Ocean is an FPSO purpose-built for extended production tests or for small field development.

Constructed in 1999 in Glasgow, the 100-m long vessel has operated in the North Sea's Chestnut field and can be conventionally moored with a central turret. Its process facilities can handle up to 40,000 b/d and 50 MMcf/d of gas.

The joint venture has contracted theCrystal Ocean until at least Jan. 15, 2008, with an option for a total of three extensions for an additional four years on location at the fields, in Retention Licenses VIC RL 6, VIC RL 9, and VIC RL 10.

The Basker, Manta, and associated Gummy fields have proven and probable recoverable oil reserves of 23.3 MMbbl. In addition, a contingent gas/condensate resource of 19.2 MMboe has been identified.

If the fields are fully developed, at an estimated cost of A$200 million (for the oil only), production is expected to peak at 20,000 b/d.

Beach Petroleum, which directly owns a 9% stake in Anzon as well as its 25% ownership of the BMG assets, expects to fund its participation in the BMG project from existing strong cash reserves and revenue from its other oil production assets.

The company has an option to acquire a further 12.5% in the fields.

12-17-04

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