commencement of operations lorraine: france

11 July 2006
COMMENCEMENT OF OPERATIONS
LORRAINE, FRANCE

http://sa.iguana2.com/cache/69a85c82752cda5bc4e76daf16db5c03/ASX-EPG-327974.pdf

Extract:
HIGHLIGHTS
#56256;#56510; Landholder access agreements finalised.
#56256;#56510; Government approvals achieved for the Folschviller program.
#56256;#56510; Drilling contract finalised.
#56256;#56510; Site works complete at Folschviller and have commenced at Diebling.
#56256;#56510; Two core well drilling program to commence the week of 24 July.

INTRODUCTION
European Gas Limited (“European Gas”) is pleased to announce the commencement of operations at its 75% owned Lorraine Project in eastern France. The principal target is Coal Bed Methane (“CBM”).
The initial program comprises two vertical core wells enabling definition of parameters for the two subsequent under balanced lateral development/production wells.

The program is in preparation for the development of the large Gas in Place Resource which to date totals 28.1 billion cubic metres (“Bcm”) (991.2 billion cubic feet (“Bcf”)) within approximately 7% of the
Company’s permit and application areas.

PROGRAM
The first well at Folschviller in the Saint Avold block (see Figure 1.), is scheduled to commence on or about 24 July. Upon completion the rig will then be used to drill the second well at Diebling in the Alsting block.

The drilling program will take approximately ten weeks to complete.
The first well “Folschviller St1” is to be drilled at a site 850 metres east of the town of Folschviller. The planned Total Depth (“TD”) is 1300 metres and three major packets of coal are targeted to be intersected between 870 and 1300 metres from surface. The Westphalian D coal bearing sequence should be encountered at 700 metres where HQ core will be cut through to TD.

The second vertical well “Diebling St1” is to be drilled at a site 2.1 kilometres south west of the town of Diebling within the Alsting block. The planned total depth is 1500 metres and six major packets are targeted. The Westphalian D coal bearing sequence should be reached at 880 metres and coring will be continuous from that point through to TD.
The primary objective is the Westphalian D and C sequences with approximately 30 metres of net coal targeted in each well".

FUTURE PROGRAM
Subject to rig availability and casing delivery schedules, development drilling is planned to commence late 2006 to early 2007 at both Folschviller and Diebling. The combination of multi lateral drilling, directed perpendicular to the compression fields, combined with under balanced conditions will allow for maximum exposure to the coal packets and should lead to enhanced permeability. If required, non formation damaging “dry gas fraccing” may be used to enhance gas flows.
It is expected that each well will support in the first instance up to 2400 metres of lateral development within the same coal packet. The wells will also be engineered to enable additional laterals to be drilled into other coal packets.
The initial development wells will each drain areas where the energy density is in excess of 400 million cubic metres of methane per square kilometre (37 Bcf per square mile) measured in coals shallower than 1500 metres.
The Westphalian sequences in the Lorraine Basin are not water saturated therefore dewatering is expected to be minimal".