PROJECTS:

SERAM
(NON-BULA)
PROJECTS

Lion Energy Limited, through its wholly owned subsidiary Lion International Investment Limited holds a 2.5% strategic equity interest in the Seram (Non Bula) Block Production Sharing Contract (“Seram PSC”). Click here for details of the Seram PSC.

Information on projects:

• Location
• Oseil Discovery
• Oseil Field Development
• Oseil Oilfield Reserves
• Seram PSC Exploration
• Leads & Prospects, 2005
• Glossary

LOCATION

The block is located in Eastern Indonesia - see the Location Map below.

OSEIL DISCOVERY

In 1993, the Seram PSC joint venture made a significant oil discovery with the Oseil-1 wildcat.  Located at the eastern end of a structural closure, the 3,475 metre well tested oil from two zones in the thick Jurassic Manusela limestone at a combined rate of 6,000 BOPD, limited by pump capacity. The discovery is 23km inland from the Bula township.

Appraisal well Oseil-2, located approximately 4.7 km northwest of Oseil-1, was drilled in July 1998 and suspended as a future oil producer. An oil column in excess of 200 metres was encountered and the well flowed at rates from 685 - 2,112 BOPD with 0-57% water cut.

The third appraisal well, Oseil-4, was drilled in August 1998. Of the three wells this was the most successful, flowing at an average rate of 6,377 BOPD and 1.1 MMscfD gas over the interval 2,067 to 2,156 metres.

The Manusela reservoir is essentially a limestone in which hydrocarbon storage is contained in high permeability macrofractures and low permeability microfractures of tectonic origin.

The primary recovery mechanism is water-oil-gravity drainage in the high permeability macrofracture system, supported by a strong aquifer. Long horizontal wells are required to maximize fracture intersection and ultimately oil recovery.

The development of the Oseil oilfield has included:

• The completion of the original wells Oseil-1, Oseil-2 & Oseil-4. These wells commenced production, through a temporary processing facility, in December 2002.
    
• The design, construction and commissioning of an oil gathering, processing and shipping facility. This was commenced in 2000 and commissioned in October 2003. Oil from the wells flows to a Field Processing Facility, where oil, water and gas are separated and measured. The oil and water is then transferred to the Main Production Facility via a 17 km pipeline, where the water is treated prior to disposal and the oil is processed into High Sulphur Fuel Oil and Naptha. The refined products are stored in onsite tankage, prior to shipment via the Export Facility Jetty designed to handle 85,000 DWT tankers.
    
• Drilling of an appropriate number of development wells. Development drilling was commenced with Oseil-3 spudded on 19th November 2004. Subsequently, Oseil development wells 3, 5, 6, 7, 8, 9, 10, and 11 were drilled and completed. The development drilling rig was released May 2006. In addition, during this time, Oseil Tenggara-1 well was drilled into the Oseil Tenggara structure and completed as a producing well.

OSEIL OILFIELD RESERVES

Reserves have been constantly updated since discovery, with the most recent estimates based on:

• History matching of production. To 31st December 2005, cumulative crude oil production from Oseil was 3,304,342 barrels.
    
• Updated volumetrics derived from a structural model generated using the 3D seismic acquired from April 2002 to October 2002 and comprising 7,500 shots with the receiver covering layout 225 square kilometres.

• Analytical modeling and simulation.

Current Gross Reserve estimates range from 40 to 73 million barrels of oil.

The range in reserve estimates occur as a result of the complex geology and difficult reservoir performance prediction (a common problem in fractured carbonate reservoirs). As new development wells are being completed, the production performance over time of these wells will enable more precise reserves estimation.

The majority of the 7,620 Seram Exploration Area remains virtually unexplored. Two deep wells, Bolifar Utara-1 and East Neif-1 were drilled in 1988, prior to the Oseil discovery. Both wells recovered low to medium API oil from within the Manusela Limestone as well as gas from shallower levels.

Lola Kecil-1 vertical exploration well was the sixth well drilled on the Seram PSC, and was intended to test for the presence of the Manusela Carbonate in a structure located midway between the Oseil structure and the Bula Block Oilfields. However the Manusela carbonate was not found and the well was temporarily abandoned in June 2002.

The balance of the block has been explored sparsely with:
  

• 214km seismic programme in 1986-87
• 2,403kms of Airborne Gravity / Magnetic Survey in 1989
• 800km seismic survey acquired in 1990 - 91
• Synthetic Aperture Radar (SAR) survey of 10,000sy km completed in 1992
• Remote Sensing Survey completed in 2000
• Extensive Regional Gravity and Geological survey completed in 2002.

As a result, a Prospects and Leads Inventory has been generated. The following summarizes these prospects and leads.

Number of Prospects: 10
Resource IP: 2,293 MMBO
Resource RR: 1,411 MMBO

Number of Leads: 9
Resource IP: 243 MMBO
Resource RR: 150 MMBO

IP

RR

In Place

Recoverable Resource