Gippsland Offshore Petroleum Limited (Gippsland Offshore Petroleum), a 50% equity partner in the Jamaica joint venture (JJV), has five exploration permits over 14,500 square kilometers (kms) of frontier exploration acreage offshore Jamaica over the majority of the Walton basin. Award of the project followed an open bid and the JJV signed contracts with the Petroleum Corporation of Jamaica (PCJ) in 2006.

The technology agreement between Gippsland Offshore Petroleum and BHP Billiton was a key factor for the company to map the large area that covers many protected reefs and atolls. This technology is known as ALCON (R), an airborne gravity gradiometer (AGG) system that is a non-invasive exploration tool. The presence of thick carbonate rocks in the geological section meant that historically, seismic quality was poor and measurements of other rock properties (such as density in the case of AGG) were important to help in the interpretation of the geological data.

The area was of great interest to the company as it had been ignored for twenty years by the exploration community. However, of the 11 wells that had been drilled in and around the basin, 10 of them had oil shows proving a working hydrocarbon generating system. The presence of oil and gas seeps both onshore and offshore adds strength to this case. The last well was drilled in 1978 and the old seismic data was poor.

Exploration:

The JJV signed five year exploration licenses with the PCJ and has now completed the exploration commitments to the end of 2010. Over the initial two year period, the JJV has spent almost $13 million on exploration over the blocks comprising 24,000 line kms of AGG data, 7,000 kms of long offset 2D seismic, reprocessing 12,560 kms of pre-existing seismic data and geological and geophysical studies to integrate and interpret these data. Although there is no well commitment until year five of the permits, the JJV would like to commence drilling as soon as feasible.

Gippsland Offshore Petroleum has been leading the geological and geophysical data interpretation and prospect mapping on behalf of the JJV. The JJV has established that the Walton basin has potential to house multi million barrel oil and gas fields. The combination of the AGG and 2D seismic has been effective in producing a 3D geological model of the basin and fast-tracking the understanding of the structural framework of the basin. To date, seven prospects have been mapped with upside potential for greater than 2 billion barrels of recoverable oil.

Farm-out progress:

The JJV got underway in seeking a farm-in partner for progressing these prospects to drilling early in 2008 using the services of IndigoPool, a Schlumberger subsidiary that specialises in assisting companies complete farm-outs. The onset of the global financial crisis coinciding with the high oil prices of the second half of 2008 resulted in oil companies focusing on oil production and bringing near term production on stream as soon as possible. As a result, there was reluctance from companies to take on new, frontier projects and the advice from IndigoPool has been to take the project to market again mid 2009 when the stabilization of the oil price will see companies starting to get on with business as usual. Jamaica project fundamentals.

The fundamentals of the Jamaica project are very strong:

— Five large, offshore blocks covering 90+% of the Walton basin

— Working petroleum system proven by oil and gas shows and detected seeps

— Opportunity rich – Eocene to Jurassic multiple play concepts with many leads/prospects in each (e.g. basin floor fans, reefal build-ups, and horst blocks, tilted fault blocks, gentle folds of marine clastics and carbonates, and fluvio-deltaics)

— New 2D seismic and AGG data covering the majority of the area

— Provenance and reservoir/seal study

— Cretaceous and Tertiary source rock studies and geochemical modeling

— Large potential: an inventory of leads – each holding several hundred million bbl in place

— Excellent fiscal terms and 15 year income tax concession period

— Significant future energy needs onshore Jamaica (bauxite / alumina / electricity) for both oil and gas

— Geographical advantage – close to the large North America gas market in the case of a very large gas discovery S N

Cross section through the Squire prospect

Kenya:

Overview:

Gippsland Offshore Petroleum farmed into block L-6 in the offshore Lamu basin, Kenya in January 2007 after spending $2 million on a seismic and FALCON (R) program in the block. The company now operates the block and has 60% equity.

The L-6 block is about 40% onshore and FALCON (R) was key to the company entering the block.

The cost of exploring in the transition zone between the on and offshore is often prohibitively expensive as multiple seismic crews need to be mobilized with specialist equipment for the various terrain or offshore conditions. This has meant the L-6 block has been relatively ignored for exploration in the past.

The wells in the area have strong gas shows and the focus of exploration in the past has also been oil so gas plays have been ignored.

Exploration:

As with the Jamaica project, within one month of signing into the block with the Ministry of Energy in Kenya, the company had mobilized a seismic boat and the FALCON (R) aircraft. The 1,200 kms of 2D seismic and 5,000 kms of FALCON (R) were completed within three months.

This fast tracking of the exploration was essential to have prospects mapped within eighteen months. The target was reached and the company now has seven mapped prospects with both oil and gas prospectivity supported by seeps and DHI’s (direct hydrocarbon indicators) on the seismic data.

The prospects mapped have potential for recoverable reserves of 4TCF of gas and 1.7 billion bbls oil. The company is now entering a new phase of the PSC in which two wells will be drilled in the block in the coming four years. The onshore Kudu prospect is to be tested first after some additional seismic to better define the extent of the prospect and optimum drill location.

Farm-out progress

At the end of 2008, Gippsland Offshore Petroleum approached to bring in a partner to the L-6 project and has been working during this quarter to complete a farm-out on the project. The potential partner will have expertise in gas development and will join the company in the drilling phase of the project.

L-6 project fundamentals:

— Good indications of hydrocarbons as two wells have flowed gas (Pate-1 and Pandangua-1) and numerous wells have gas shows

— A number prospects with potential greater than 2TCF gas and 200mbbl oil

— Gas is most likely onshore and in the northern half of L-6

— Oil is possible in the south of L-6

— Prospect ranking favors onshore Kudu prospect – planning to test in the next 12-18 months

— Excellent onshore development terms (more favorable than onshore Australia)

— New, larger company entrants to Kenya in recent months – increased interest in the area

— Interest from potential partner companies in the area

France:

Overview:

In mid 2005, Gippsland Offshore Petroleum and Sydney based Gas2Grid Limited formed a study group to review the opportunities in the Aquitaine basin in France given Exxon had retreated from oil and gas exploration in the country. There has been no active exploration in the basin since the mid-1980’s even though there have been 13TCF of gas and 450mmbbls of oil discovered to date. Markets and infrastructure are well developed, and the commercialization of even small discoveries is unlikely to be problematic.

The withdrawal of Exxon left the opportunity to access prospective acreage between known producing fields. Coupled with this, the eastern flank of the basin is very poorly explored and offers considerable “upside” opportunity. Gippsland Offshore Petroleum submitted a bid for exploration acreage in January 2006 and application was formally granted May 2008.