China


In December 1996, we acquired a petroleum contract for the WAB-21 area issued by the People's Republic of China, which covers 6.2 million acres in the South China Sea, with an option for an additional 1.25 million acres under certain circumstances. The prospect lies within an area which is the subject of a border dispute between China and the Socialist Republic of Vietnam. The border dispute has existed for many years; however, we have obtained license extensions, the latest of which will expire on May 31, 2013. It is our intention to continue to secure contract extensions so long as the border disputes persist and until the disagreement is resolved, we do not anticipate making sizable investments in exploration efforts.


We continue to hold our interest in WAB-21 because of the block's high potential. The WAB-21 contract area is located in the West Wan' an Bei Basin (Nam Con Son) of the South China Sea. Its western edge lies approximately 20 miles to the east of significant producing natural gas fields, Lan Tay and Lan Do, which are reported to contain two trillion cubic feet (Tcf) of natural gas and commenced production in November 2002. To the west of WAB-21 are the Dua and Chim Sao discoveries and the discovery in 2009 of Ca' Rong. The WAB-21 area covers a large unexplored area of the Wan' an Bei Basin where the same successful Lower Miocene through to Upper Miocene plays to the west are present. Exploration success in the basin to date has resulted in discoveries estimated to total in excess of 500 MMBbl of oil and 7.5 Tcf of natural gas.