Pancontinental in Talks Over New Oil & Gas Exploration Blocks Award, Offshore Kenya

Pancontinental Oil & Gas NL  (“Pancontinental”) announces that, together with three co-applicants and led by BG Group plc (“BG Group”), it is in negotiations for the award of oil and gas exploration and production licences over Blocks L10A and L10B offshore Kenya following an offer by the Kenyan Ministry of Energy.

The offer is subject to the negotiation of Production Sharing Contracts (“PSCs”) for the two Blocks with the Ministry over the coming weeks.

These new Blocks would be additional to Blocks L6 and L8 already held by Pancontinental and the subject of other recent ASX announcements.

Subject to the success of negotiations and contracts, the new areas will more than double Pancontinental’s gross acreage position offshore Kenya. The proposed work programme includes 2D and 3D seismic surveying in the first phase with drilling in later phases.

The consortium consists of- L10A L10B

BG Group plc 40% 45%

Premier Oil Investments Limited 20% 25%

Cove Energy plc 25% 15%

Pancontinental Oil & Gas NL 15% 15%.

The L10A and L10B Blocks have respective areas of 4,962.03 sq km and 5,585.35 sq km and water depths of 200 to 1,900m, which is within the reach of modern drilling and development technology.

The L10A and L10B offers have come about after earlier applications by Pancontinental. Subsequent to Pancontinental’s original applications, Pancontinental joined BG Group and then a Premier and Cove consortium that had lodged separate applications.

Further negotiated details of the PSC’s and details of planned exploration activities will be announced in due course.

Mr Barry Rushworth, CEO and Director of Pancontinental commented-

“We are delighted to be progressing with negotiations for these new Blocks, and particularly with a group of some of the most successful UK-based companies in the oil and gas business.

The exploration programme we are discussing is effectively a “fast track” to drilling in this highly promising exploration province.

Our existing Kenyan projects are moving ahead strongly, with the entry of Apache to L8 as announced on 16 February.

Early planning has already commenced for drilling the giant Mbawa Prospect under Apache’s operatorship and we expect to be making further announcements regarding L8 in the near future. We have not yet fixed a firm drilling date for Mbawa due to a number of factors including rig availability.

We will shortly commence full negotiations of the PSC’s for the new Kenyan areas and we look forward to making further announcements about all areas as matters unfold”.

East Africa, Offshore Kenya and Pancontinental’s’ Interests

Offshore East Africa has become an industry focus through recent major deepwater gas discoveries and an oil discovery offshore Tanzania and Mozambique. Further drilling is under way in these areas south of Kenya and more drilling rigs are being brought to the region.

In Kenya, Pancontinental already holds interests in Block L8 (25%) and L6 (40%) where the largest prospect is the giant Mbawa Prospect in L8. Mbawa has potential easily in excess of one billion barrels of oil recoverable or several trillion cubic feet of gas at inferred Tertiary / Cretaceous levels and significant potential at deeper Jurassic levels. Mbawa has interpreted sea surface oil leakage and seismic “flat spots” consistent with hydrocarbon interfaces at depth. New 3D mapping will enable volumetric estimates to be refined.

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Source:Pancon, February  23, 2011;