SSI’m not so sure on the idea that KEY would focus on KN-1 and...

SS

I’m not so sure on the idea that KEY would focus on KN-1 and let drilling on the Borsano block slip given they are not the Operator of the Nyuni Block. Mind you, I’m not suggesting there is no work to be done by KEY on KN. These guys are professional and I expect they will attempt to progress both opportunities simultaneously. However, I do appreciate the argument put forward by Roznov.

I don’t expect it will cost KEY very much at all to fork out a 20% share of a ~3-4km pipeline laid on land to the Songo Songo processing facility. Mind you I have not investigated the costing. You can probably see the plant from the KN-1 well site! Even if they wanted to drill more wells into the Kilawani structure they would have to wait months and months for a rig. I would be surprised if they could manage to spud another well in Tanzania this year.

Therefore, in my opinion, i expect they will spud at least one well on Borsano. I expect that rig availability would be less of an issue in the Po Valley and expect mobility costs to be less (relative to east coast Africa). They may decide to simply spud one well in the Borsano block with a second contingent well. Who knows..........

The beauty of their portfolio now is that the higher risk play in Tanzania, which was always going to be seen as somewhat frontier, has potentially paid off (subject to successful test) and they have what is perceived to be a lower risk play in the Po Valley and a money for nothing free carry in Suriname, if and when Tullow Oil decides to resume drilling in the Uitkijk Block.

I completely agree that their goal should be to get the FPO's sailing above the KEYO strike of 35c by MAR09. At least I really hope that is their goal given I only hold KEYO! However, I will be very disappointed, along with others, if they delay their Borsano drilling program. If the flow rate from KN-1 is sub-optimal, KEY may actually need a sucessful well in Italy to ensure the FPO's are above 35c.

Anyway, i clearly dont have the answers and time will tell. Hopefully the quarterly will shed some light on their intended operations for the rest of 2008.

Still excited,
Marxist