TP/15: offshore Perth Basin

(Norwest 50%, Bharat PetroResources Limited 50% following completion of farm-out)

TP/15 is a highly prospective permit that lies off the WA coast from Dongara-Port Denison. The next permit to the west hosts the productive Cliff Head oil field, while onshore permits immediately east and south of Dongara hold the Jingemia and Eremia oil fields and the Hovea gas field.

Norwest has used reprocessed seismic and an FTG gravity survey to identify and define several attractive prospects. The two that are most mature for further drilling are Xanadu and Red Hill South.

Norwest believes Xanadu has a potential 98 million barrels of oil in place with potential for 28MMbbl of recoverable oil. Red Hill South could hold up to 34MMbbl oil in place with potential for 9MMbbl oil recoverable.

Both of these prospects can be drilled at relatively low cost from onshore sites using deviated drilling techniques. Norwest and its farm-in partner Bharat PetroResources Ltd (BPRL) plan to begin by targeting Red Hill South.

BPRL will provide up to $4.5m of the estimated costs of $7.5m of the drilling costs for Red Hill South (including testing and completion, and geological and geophysical studies) to earn 50% interest in the block. NWE will fund up to $3m of the total estimated drilling cost. Norwest will also receive reimbursement of $500,000 of past costs from BPRL.

Norwest's well planning and drilling consultant, Aztech Well Construction, is reviewing drill rig availability. Unfortunately, there is only one suitable rig currently operating in Western Australia and it is contracted until the end of this year. The permit expiry date is 26 October, 2010. Therefore, Norwest has applied to the Department of Mining & Petroleum to suspend the permit work obligations and extend the permit period until 26 August, 2011 to allow sufficient time to source a rig and drill Red Hill South. DMP is sympathetic to the difficulties facing Norwest and other operators and there is every reason to expect the extension will be approved.

Other operators are confronted with the same problems of sourcing suitable rigs to meet their drilling obligations and are working together to explore options. Aztech, acting for Norwest, is also reviewing alternate rig options, including shipping a rig from the eastern states.