Petroleum Prospecting License 338


On 2nd September 2009, Kina was awarded 100% working interest in PPL 338.

Location and Infrastructure

PPL 338 covers an area of 3,159 km2 onshore Gulf Province within the eastern Papuan Basin. The licence comprises one large southern block of 30 graticular blocks (2,430km2) appended to the Uramu PRL and 3 smaller blocks in the north comprising 3 graticulars each. PPL 338 is near Elk-Antelope gas discovery in PRL 15. The structures interpreted in Kina’s two PPLs are analogous and on trend with several of the recent discoveries made by InterOil.

PPL 338 is well located to existing infrastructure being approximately 75 km southeast of the Gobe oil fields, 30 km west of the giant Elk/Antelope gas discoveries, close to the town of Kerema and is 280 km north-west of Port Moresby.

It is about 30 km east of the Oil Search’s oil export pipeline and Interoil’s planned Elk/Antelope export facilities will traverse its eastern border area.

Geology

The entire area of PPL 338 is covered with a thick blanket (between 2 to 5 kilometres) of non marine to marginal marine ill-sorted clastics (silts, clays, some sandstones and minor coals). Primary exploration targets are the Miocene and Eocene reef reservoirs sealed by the overlying Pliocene mudstones (Orubadi Formation) .

Success at Elk/Antelope (2006-2013), and Triceratops (20xx) located only 30 km to the north east of PPL 338, confirmed the viability of the Eocene and Miocene limestone reef play. Most recent success by Interoil at Triceratops encouraged the PPL 338 Joint Venture to investigate a possible extension of the Triceratops discovery into northern PPL 338. PPL 338 is on a reef carbonate fairway running from Pandora in the south through Pasca, Uramu and continues up to Elk/Antelope and Triceratops.

Northern PPL 338 prospects - Triceratops Updip, Triceratops North and Bobcat Northwest - have a top reservoir target over 1000m shallower than those at Bobcat. KPL is currently reprocessing seismic data in the Triceratops area to high-grade future drilling locations.

Further south in PPL 338 Kina interprets two very large prospects: Mangrove and Nipa. Mangrove now includes a previously separate closure called Crocodile. During the quarter KPL has undertaken seismic reprocessing tests of vintage data over Mangrove. The reprocessed data show significant improvement over the original. The improved resolution has allowed a better understanding of the Upper Miocene section within PPL 338.

This Upper Miocene reservoir has not been tested in PPL 338 and the Mangrove closure is currently mapped at approximately 300 sq km. Carbonate build ups within the upper Miocene are supported by recent Strontium isotope analysis. At Mangrove, top reservoir may be as shallow as 800m below surface with vertical closure over 200m. A full appraisal of Mangrove will be finalised upon completion of the seismic reprocessing of the PPL 338 data in Q1 2015.

Nipa is a large mapped closure of up to 170 sq km between Mangrove to the north and the Uramu gas field to the south. Nipa is believed to be on trend with and analogous to the nearby Uramu and Mira structures. Uramu -1 (1968) intersected gas in a Miocene carbonate at a depth of 1860m and flowed gas at rates up to 24.4 MMSCFPD.

Mira-1 (1972) intersected upper Miocene carbonates at 1643m with high gas readings recorded in both the Pliocene clastic section and carbonate. A DST of the carbonate at 1646m flowed gas cut water at a rate of 1620 bbl/day. Kina’s interpretation has Mira at the limit of the Nipa closure with a vertical relief of up to 690m and top carbonate at 1160m. Seismic reprocessing of data over the Nipa prospect will commence in Q1 2015.

Previous Exploration

Early gravity data (1940s and 50s) identified the Wana Swell and caused the Wana-1 stratigraphic test (1950) to be drilled. Wana-1 flowed from the Eocene limestone 18,000 barrels water per day (bwpd) and confirmed the presence of good reservoir. Offshore 10km south of PPL 338, Uramu-1, 1A (1968) discovered gas within the Miocene reefal sequence.

About the same time Iviri-1 (1965) and Ini-1 (1969) wells were drilled onshore to test seismically controlled reef traps and although dry they confirmed good porous and permeable zones within Eocene and Miocene carbonates.

The Company is in possession of data from 9 seismic surveys (dating from 1959) that traverse PPL 338 and data quality is generally good. Reinterpretation of existing seismic data identified a reef trend with up dip potential south and east of Iviri 1. This has been followed up with 57km of seismic acquisition over the Nipa Prospect. Nipa remains a target but further seismic data is required to confirm separation between Nipa and Ini-1.

Current and Proposed Exploration

InterOil’s (IOL’s) Raptor-1 in the adjacent PPL 475 was drilled to 4,032m with gas and condensate recorded at surface from a 200m interval of Kapau limestone. Prospects in PPLs 338 and 339 are interpreted as analogues for the Raptor structure.

In central PPL 338, Kina recognises two leads: Waxbill and Brown Lory, both located west of Raptor-1. Brown Lory may be reefal and is along trend from Raptor and also interpreted to be up-dip of Puri-1 (1,610 bbl/day from a depth of 2260m).

InterOil’s Bobcat-1 in the adjacent PPL 476 was drilled to 3,207m and tested over a 320m interval of Kapau limestone, flowing hydrocarbons at surface. Logging and testing indicate the well is close to a gas-water contact. InterOil’s seismic data indicates the crest of the structure lies several km west, and several hundred metres higher than at Bobcat-1. Kina interprets two prospects in the northern portion of PPL 338: Triceratops North and Bobcat Northwest, up-dip and along trend from Bobcat-1.

The Tagula Seismic and gradiometry surveys were completed over Triceratops extension into northern PPL 338. Triceratops-3 will spud in Q2 2015. Kina recognises extension of a successful Triceratops-3 into PPL 338. Kina also recognises follow up at Triceratops Updip, Triceratops North and Bobcat North West. Bobcat-1 intersected a possible transition zone. South of Triceratops Kina maps 2 prospects at Brown Lory and Waxbill both up dip of an oil flow from Miocene carbonates at Puri-1 and recently tested Raptor-1.

The largest prospects are recognised at Mangrove and Nipa. Seismic reprocessing of data are Mangroves deposition of a Late Miocene shoaling faces with a real closure of upwards of 300 sq km. Full reprocessing of the data set is currently underway to improve well ties from Muabu 1 and Wana 1 with Mangrove Prospect.

Oil Search Farm-in

In October 2010 a farm in agreement was signed with Oil Search Limited, whereby Oil Search could earn up to a 70% participating interest in PPL 338 with Oil Search to earn a 30% participating interest in PPL’s 338 and 339 by acquiring seismic data over PPLs 338 and 339. Subject to the results of the seismic, Oil Search could increase its interest to 70% in PPL 338 by drilling a well. Oil Search withdrew from PPL 338 in 2014 following acquisition of the Tagula seismic program.