Promise of 27m tonnes in place tempts IOC

Vol 5, PW 25 (13 Feb 02) Exploration & Production

BLOCK AAP-ON-94/1 HAS estimated recoverable reserves of 27m tonnes of oil.

Phase-I of the exploration programme has already begun. We learn the PSC commits the operator to a seven-year work programme split into three phases.

HOEC estimates total exploration costs at $25.65m. Phase Phase 1 (2 yrs) Phase 2 (3 yrs) Phase 3 (2 yrs) Work programme 1st year: Gather data, complete structural modelling studies, reprocess data Acquire 100 line km 2D seismic, drill one exploratory well to a depth of 2,000 metres/sub thrust prospect/basement Drill two exploratory wells to a depth of 2,000 metres/sub thrust prospect/basement Estimated cost (in $) 950,000 10,700,000 14,000,000 For all the three phases, Indian Oil's share is around $7.2m, including the premium to HOEC.

An exit clause is available after each exploration phase. A summary of the project economics is as below.

Price ($/bl) Internal Rate of Return (%) Net Present Value ($m) 16 16 10 18 22 23 20 28 35 22 33 46 25.5 41 63 Cost recovery is 80% of production, there are no bonuses, profit split is based on investment multiples and there are no rentals. Is it any surprise that Indian Oil is keen to get aboard Post farm-out, the equity structure will look like this: Premier Oil (north east India) BV 38% (operator) Indian Oil 27% HOEC 25% Oil India 10%