What are we expecting to hear tomorrow?, page-26

Gilbert,

It's all abt credibility as u say. One wouldn't want the current JV to b the Custodians of a complex field.

WPL copped it at Tiof (900 OIIP, 2P-287 mmbls that ended up as 2P-100), Chinguetti (2P-123 ended up as 2P-53) & Tevet wasn't even worth it with 2P-12.5 mmbbls of condensate.

Tullow had no option but to write off Mauritania & dropped its plans for developing Banda gasfield (2P-1.5 tcf) for the locals.

Always expect the unexpected. The 3 fields in the 'hood includes Chinguetti that went to first oil in 58 months since its discovery. Still trickles in at ~5k bopd, 10yrs later.

Baobab with its 2P-191.5 mmbbls of 23API went to Commerciality once the JV succesfully flowtested the first 2 wells & went full throttle with its development plans from 8+3 wells or rather 48k+ bopd in 52 months (first oil Aug'05).

And then there's Jubilee where the JV planned to drain 2 sands out of 5 & had issues during the first 14 months with low flwrates (sub 80k bopd) & had to bring fwd its Phase-1a drill program to eventually meet its objective flowrate of 102k bopd. So first oil in 42 months in Nov 2010 is the benchmark to beat at SNE.

DoC is crucial for any offshore or Onshore field.

The JV needs to know how much oil is there & whether its commercial enough at today's mkt rates or in 3 yrs time. So size does matter to start with.

In a nutshell there r 3 steps to DoC & beyond: Explore, Evaluate/appraise & Exploit/Develop.

- I wont touch on the Exploration phase (tenure renewals & 3Dseis interp etc) just skim past Eval/apprs.

- Once Evaluation drilling is completed a commercial reserve is established. At this juncture the JV has to to lodge plans with the Senegalese to Exploit the Oilfield which requires Govt approval & their right to increase their share.

- In parallel, the JV selects the right concept of Development of that Oilfield & decides on the overall budget (commonly known as pre-FEED & FEED studies & Final Invstmnt Decision aka FID).

- Once approved is granted by the local Govt, they can drill more wells and go ahead with the Exploitation phase heading towards Production.

- Prior to production, usually 4 types of Contractors have 2b selected via an Open Tender process (ie: Rig supplier. Supplier for Xmas trees, manifolds. Supplier for the FPSO & the party that does the subsea installation & Turret checks etc).

That in a nutshell is the entire process.

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To summarise:

DoC simply means, yes we have sufficient crude oil reserves sub-surf. We can let it sit if POO tanks to US15/bbl or opt to develop it in phases at US35-40/bbl, as the Fiscal terms r darn good even in a soft market.

Lots goes on behind the scenes incl smoking cigars, diplomatic shoe shuffle, contractor selection and above all finding the funds/capital to develop the field. At the DoC stage, the locals can join the fun & fund their share of costs. I wont tell u how..... that's for another day. Let the JV showcase a revised estimate.

Obvious Benchmark:

- Jubilee's unitised 1P-2P-3P reserves for 3 Mahogany sands r 234- 328-443 mmbbls (NSAI certified).
- Full field Reserves for 5 Mahogany sands are 470-675-1065 mmbls. (deduct ~150mmb produced in 5 yrs)
- TEN: midcase of 240 mmbbls (plus 200 mmbbls for the future)

- SNE's Contingent post RISC estimates r SNE-1 r 240-468-940 mmbbls (as per FAR)
- SNE's revised estimates as per Cairn, should b known by tomorrow.

We just have to wait in the slip cordon for that edge now. Hope they serve finger food this time around.