Gippsland Basin – Vic/P41 & Vic/P66

General

Offshore Permits Vic/P41 and Vic/P66 are situated is an attractive address in Eastern Gippsland ontrend to nearby discoveries – namely Kipper, Basker-Manta-Gummy and Sole within a proven hydrocarbon basin.

Both are non-operated interests held by Oil Basins Limited (OBL) with Bass Strait Oil Company Ltd operator.

OBL has owned 12.5% rights (via a low cost Drilling Option - see below) to the more prospective Vic/P41 permit since negotiating an initial 7.5% rights via a conditional entry in March 2006 – it was a foundation interest in the OBL July 2006 IPO and was subsequently increased to 12.5% rights immediately upon ASX relisting on 23 August 2006.

Vic/P41 remains an OBL core investment with circa $1.2 million invested todate.

Exploration permit Vic/P41 is located on the north eastern margin of the offshore Gippsland Basin, in south east Australia’s Bass Strait (Figure 1). The permit covers an area of some 1,079 sqkm, in water depths of 120-1500m.

Oil Basin Limited as holds 17% interest in the eastern contiguous Permit Vic/P66 which holds the ‘Lead A’ extension.

Vic/P41 contains a number of large prospects defined on modern 3D seismic, notably Kipling, Benchley and Oscar, whereas Vic/P66, while containing part of the 2D-defined ‘Lead A’ feature, is still at an early stage of exploration with clear potential to further extend the Rosedale trend in to new areas.

Location

Figure 1: Location of Oil Basins interests in Offshore East Gippsland

Good Hydrocarbon Address

The Gippsland Basin is a proven prolific basin. It is Australia's premier crude oil province as well as a major gas producer with initial proven reserves of circa 4.2 billion barrels of crude/condensate, 720 MMbbls LPG and 11.2Tcf natural gas. Estimated remaining reserves were about 270 MMbbls crude/condensate, 165 MMbbls LPG and 4.2 Tcf gas as reported end 2007. The estimated “yet to find” resources in the basin are substantial with the 2010 United States Geological Survey P50 estimate being 600 million barrels of liquids and 5 Tcf of gas.

Exploration within the Gippsland Basin can be considered at a mature stage but only for the Top Latrobe Group play which met with substantial early drilling success. However, the focus is now on the far less explored intra Latrobe plays targeting the basal Halibut, Golden Beach and Emperor subgroups which are expected to be major contributors to future hydrocarbon discoveries in the basin.

Permit Vic/P41 Prospectivity

The unsuccessful Hammerhead-1 (1982) and Shark-1 (1989) are the only wells drilled in the permit. Both were defined on 2D seismic with subsequent evaluation on 3D seismic data showing them to be structurally invalid tests. Vic/P41 remains under explored by the drill bit. Yet nearby commercial fields, including Sole (Top Latrobe), Kipper (Golden Beach Subgroup), Basker/Manta/Gummy (basal Halibut and Golden Beach subgroups) and Longtom (Emperor Subgroup), demonstrate a working petroleum system in adjoining permits. In terms of exploration risk, Vic/P41 is well located with respect to the basin’s proven petroleum system. Given the nearby oil/gas fields and the regional geologic framework, the presence of reservoir/seal pairs and access to hydrocarbon charge are not significant risks. Furthermore, charge modeling indicates an enhanced chance of a dominant oil phase migrating into the permit’s traps. Source rocks are expected to be present day oil generative in kitchens immediately south/south west of Vic/P41. All nearby fields demonstrated the effectiveness of fault closures. Hence intra Latrobe trap definition is considered the main geological risk.

To address this, the Vic/P41 JV acquired the Oscar 3D seismic survey in 2005. Interpretation and mapping of the 3D data has led to major advances in the understanding of the permit’s geology and overall prospectivity, identifying diverse exploration opportunities and defining several intra Latrobe prospects (Figures 2 and 3).

Prospective Potential 2P Resources

The Vic/P41 Joint Venture operator Bass Strait Oil Company has announced the following indicative resources based upon the processing of the Oscar 3D seismic 2006/2007.

Source: BAS ASX announcement VICP41 montage 24/4/07

Should the Company earn full participation rights in Vic/P41. it will presently attain circa 96 MMboe prospective potential 2P Resources.

The above figures exclude the very large Lead A feature delineated in circa 600m WD by the subsequent 2D seismic shot in 2008 in the east of the Permit.

Drilling Option Vic/P41, Gippsland Basin – OBL Legal Rights 12.5%

For the Company to earn full legal and beneficial participation rights Vic/P41, the Company will be required to make payments in accordance with the Farmin agreements entered into during August 2006 and subsequent renewal during 1Q2011.

Oil Basins Limited has the right but not the obligation to participate in the drilling of the first well in the permit.

In summary, should the Company earn full participation rights the following minimum payments will be required prior to the drilling of the first offshore exploration in the Renewal Term :

Vic/P41 (5% from Moby Oil & Gas Ltd)	$1,650,000
Vic/P41 (7.5% from Strategic Energy Resources Limited)	$2,437,500

Essentially the earn-in payments are capped at a modest $13 million (compared with typical offshore well costs of circa $40 million drilled, completed and tested) – thereafter all well contributions including Oil Basins Limited are prorata.

Current Status

The joint venture partners are in discussion with the Joint Authority for VIC/P41 permanent renewal.