Otto subsidiary named preferred bidder for exploration contract

West Perth oil and gas exploration firm Otto Energy Ltd subsidiary NorAsian Energy Ltd has been ranked as preferred bidder for an exploration service contract covering 7,440 sqkm, covering the Visayan Basin in the Philippines, the company has announced.

The full text of a company announcement is pasted below

Otto Energy Ltd (ASX: OEL) is pleased to announce that NorAsian Energy Limited (the wholly owned subsidiary of Otto) has received a letter from the Department of Energy in the Philippines, advising that NorAsian has been ranked as the preferred bidder for Area 8 for award as an exploration Service Contract. NorAsian, in partnership with its Filipino partner in its other licences, TransAsia Oil & Energy, have been selected from a competitive bid process, for this exploration area, the term of which will be for a seven year period. Area 8 will be assigned over the coming weeks as the formal terms, work commitments, and schedules are negotiated and finalized.

Highlights

• The area is considered highly prospective with over 20 already identified structures that could potentially contain hydrocarbons.
• The minimum work program commitment consists of principally 2D and 3D seismic with one firm well commitment in year 7.
• Drilling could commence as early as 2010.

Area 8 (Figure 1) lies between the Islands of Cebu, Bohol & Leyte and substantially covers the Visayan Basin over an area of 7,440km2. There is approximately 3,000km of existing 2D seismic covering the area and an active petroleum system established in the form of abundant onshore oil seeps and seismic supported DHI's (Direct Hydrocarbon Indicators) on prospects in the area. The block lies between the two sub blocks of SC51, where NorAsian already has an 80% working interest. NorAsian recently acquired 145km2 of 3D seismic data over two prospects in SC51 in the lead up to drilling in 2008 or early 2009. Area 8 offers significant follow up potential in additional structures if NorAsian has success in the initial drilling in SC 51.

Otto acknowledges that although the offshore marine area in the block has great conservation value, through undertaking comprehensive environmental baseline surveys and environmental risk assessments, as well as comprehensive community consultation programs, the company is confident of designing an exploration program to appraise the potential of the area with minimal impact.

Block Participants

• NorAsian Energy through subsidiary NorAsian Energy Philippines., Inc. (NOEPI)- Operator 70%
• Trans-Asia Oil and Energy Development Corp. 30%

Environmental Impact

Over the last year of operations in SC 51, Otto has developed a substantial understanding of the Visayan Sea basin and particularly the Cebu-Bohol straits. Otto is committed to operating in a responsible manner and as such, will be embarking on comprehensive environmental baseline surveys and environmental risk assessments to help guide its future exploration and drilling programs.

In undertaking these studies, Otto intends to work closely with local Filipino and Australian marine biology experts to best understand the ecological, social and cultural values of the area. In consultation with government and community stakeholders, Otto will develop detailed and site-specific management measures in order to reduce any potential impacts associated with the company's exploration activities in the region.

Otto will also continue its community consultation activities to further inform the locals on E&P industry activities and how exploration and production can be, and is in many other parts of the world, conducted in a way that maintains environmental values, while also providing flow on social and economic benefits to the people of the Philippines.

Work program

The minimum committed exploration work program is split in to five sub phases over a term of seven years. NorAsian can choose to opt out of the permit at the end of any of the subphases if desired without penalty. There will be associated environmental studies that will be required before operations commence.

• Sub-phase1 will consist of data gathering and G&G studies, including reprocessing of existing 2D seismic data.
• Sub-phase 2 will consist of either 2D or 3D seismic acquisition.
• Sub-phases 3 & 4 both consist of either 3D seismic or drilling of 1 well
• Sub-phase 5 consists of 1 firm well drilling commitment.

This is a proposed minimum program only and if the prospectivity of the area is proved to be significant, the drilling program could be accelerated, but only after thorough environmental impact assessment studies are completed, the community has been appropriately consulted, and drilling sanctioned by government.

Commenting on the licence Alex Parks, CEO of Otto Energy said "We consider Area 8 to be highly prospective and it has significant value to Otto, particularly if we have success in the adjacent SC51 block. We intend to secure the permit on a minimal work program commitment, but plan to execute an aggressive exploration program based on the technical merits of the area".