Rocksource acquires Cauvery basin block interest

Rocksource has signed an agreement with the Indian state oil company ONGC to farm into 10% of the exploration block CY-DWN-2001/1 located in the Cauvery basin, offshore southeastern India.

Offshore staff

OSLO -- Rocksource has signed an agreement with the Indian state oil company ONGC to farm into 10% of the exploration block CY-DWN-2001/1 located in the Cauvery basin, offshore southeastern India. The block covers an area of 12,425 sq km (4,797 sq mi), which is equivalent in area to approximately 30 exploration blocks on the Norwegian continental shelf.

The work program requires three exploration wells to be drilled in the first phase with options to extend into a second and third exploration phase, on success. ONGC is the block operator with Oil India and Brazilian state oil company Petrobras as partners.

The mean unrisked resources of the exploration block are estimated by Rocksource to be approximately 2.9 Bboe. The main prospect in the block displays a high quality, positive Controlled Source Electromagnetic (CSEM) anomaly as interpreted by Rocksource using its proprietary software, Rocksource Discover.

The prospect is estimated by Rocksource to have a mean resource size of approximately 1.6 Bboe and the chance of success is estimated to be in excess of 60%. The first well is drilling, and is expected to reach the reservoir at the end of this month, with final results expected in October, the company says.

Rocksourceís investment for the first exploration phase will be approximately $20 million. This covers Rocksourceís equity share of both the block back costs and the first phase work program (3 wells). The farm-in is subject to Indian Government approval and costs will be payable once Government approval is granted.

The farm-in agreement is a continuation of the Memorandum of Understanding to develop exploration partnerships entered into by ONGC and Rocksource in January 2008. Rocksource enters into the block by paying its equity share (10%) (ìground-floor termsî).

In a success case where discoveries are put into production, Rocksource will pay a bonus to ONGC in the form of $1 per produced barrel of oil, and $0.5 per produced bbl of oil equivalent gas. In a case where Rocksource decides to exit the block, ONGC will receive 20% of any gain achieved.

The CY-DWN-2001/1 block was originally awarded to ONGC as operator with an 80% equity share, and Oil India as partner with 20%. A subsequent farm-in agreement between Petrobras and ONGC was announced in October 2007 in which Petrobras acquired a 25% share. Upon approval by the Indian Authorities the partnership will be made up of ONGC (45%), Oil India (20%), Petrobras (25%), and Rocksource (10%).

09/19/2008

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