Oil Basins Limited: Oil and Gas Explorer

Canning Basin – Blina Back Reef Play Joint Venture Area

General

The largest nearby structure in the immediate region is the Blina oilfield which was the first commercial oil discovery in the Canning Basin. Its discovery in 1981 led to a mini exploration boom in the basin. The Blina field is located in onshore Production Licence L6 in the Canning Basin, 105 kilometres east-southeast of Derby. The field was discovered in May 1981, by Home Oil Australia with the drilling of Blina 1, which intersected two distinct reservoirs, namely the Upper Devonian (Famennian) Nullara Limestone Formation (Nullar Oil Pool) and the Lower Carboniferous dolomitic Yellow Drum Formation (Yellow Drum Oil Pool). The development of vugs in these carbonate reservoirs has resulted in excellent permeability. A drill-stem test of the Nullara Limestone produced 35.7degree API (American Petroleum Institute) oil at a rate of 144 kL/d (905 bbl/d) through a 12.7 mm (1/2") choke. A drillstem test of the Yellow Drum Formation produced 36.7° API oil at a rate of 5.7 kL/d (36 bbl/d). A total of eight wells have now been drilled in the field, four of which produced from the Nullara Limestone (1, 2, 3 and 5) and two from the Yellow Drum Formation (4 and 6). The other two wells did not intersect reservoirs. Blina 4 was subsequently re-completed and produced from the Nullara Limestone. Blina Oilfield

Nearby oil production from the Blina field commenced on 17 October 1983. At the time of writing, three wells, Blina 1, 4, and 5, are producing at 4,536 barrels of oil circa per quarter. Produced oil is gathered, separated and stored on site, until it can be transported by pipeline to the Erskine truck terminal on the Great Northern Highway.

Unlike the nearby Blina structure the proposed Backreef-1 is not a Devonian reef play type. It is a high-risk high-reward “stratigraphic trap” play-type Importantly, this earlier proposed farmin was never finalised and both this stratagraphic play type and the prospect remains untested in the Canning Basin. – Refer to Independent Expert Report and the risk section of the Oil Basins Limited Prospectus.

The area encompasses the northeast flank of the Blina reef trend and is interpreted to contain the Blina Backreef play. The trend is a sequence of talus slope carbonate rocks shed off an extensive Late Devonian reef trend which hosts the Blina oilfield in L6. Down-dip and below the reef trend/talus slope deposits is a sequence of oil prone black shales (refer to “Frasnian Trough” in Figure 3) from which it is generally interpreted that oil migrated into the Nullara and Yellow Drum Oil Pools at Blina. The talus slope deposits of the Blina Backreef play have experienced a differing geological history to the reef rocks that host the Nullara Oil Pool and, as a consequence, may contain better porosity and permeability, i.e. better reservoir characteristic.

Seismic data show the talus slope deposits probably have very extensive development and this is borne out by exposures of similar outcrops nearby. Should these talus slopes deposits have retained good reservoir characteristics, they are ideally placed to have received major oil migration from the nearby source rocks.

Prospectivity

EP 129 is located in the northern Canning Basin and includes part of the Lennard Shelf and part of the Fitzroy Trough. The Lennard Shelf has a relatively shallow basement compared to the Fitzroy Trough, and the sediments thicken westward to its fault-controlled margin. The Fitzroy Trough is fault-bounded on the north side by the Beagle Bay and Pinnacle Fault systems and on the south by the Fenton Fault system.

The oldest known Phanerozoic strata in the Canning Basin are Ordovician clastics and carbonates, which overlie a Precambrian igneous and metamorphic basement.

After a long period of emergence, movement along the Beagle Bay-Pinnacle and Fenton Faults systems during the Devonian initiated the Fitzroy Trough and separated the Lennard Shelf. On the block-faulted shelf, clear water deposition with reef complexes took place during the Middle and Late Devonian. Overlying these are the shallow marine carbonates and siliclastics of the Late Devonian-Early Carboniferous Fairfield Group, comprising the Gumhole, Yellow Drum and Laurel Formations.

The predominantly sandy Anderson Formation was deposited next, followed again by erosion at least on the Lennard Shelf.

Above this unconformity, the sand-dominated Late Carboniferous Grant Group was deposited in a continental environment. Marine Permian and Triassic clastic sediments unconformably overlie the Grant Group. In the middle Triassic, major right lateral movements along the bounding faults of the Fitzroy Trough caused further uplift and structuring. Since then the Lennard Shelf has remained elevated and has been eroded.

Current Status

The Company presently has a 50% net interest in potentially a 270 mmbbl oil target Backreef-1 Play prospect – net upside circa 94 mmbbls. In addition, the Backreef Play prospect is situated within an existing production Licence L6 – which was recently renewed on 19 May 2006 for 21 years and nearby under-utilised existing Blina Oil Hub crude pipeline, pumping and transport infrastructure (note no commercial agreements are yet in-place with new Operator ARQ).

Backreef-1 will be drilled in accordance with good Petroleum Practice by Operator BOL. Given its location within L6 any new discovery at Backreef Play prospect may lead to a rapid development of the field.