Relinquishment Report P.517, Block 44/27a August 2011 Page 1

RELINQUISHMENT REPORT FOR LICENCE P. 517 Block 44/27a

Licence: P.517

Block: 44/27a

9th Round Traditional Licence

Operator: Ithaca Energy UK(Ltd) 68.33%

Partner: Centrica North Sea Gas Ltd 31.67%

Work Programme Summary:

Following the acquisition of an interest in Block 44/27a from GDF SUEZ E&P UK, an agreement

was made with the regulatory authorities (DECC) to extend the licence term to allow Ithaca Energy,

as incoming operator, to make its own assessment of the production potential of the Garnet

discovery. An extensive review of all the subsurface data was performed in Q1 2011 in order to

fully assess the development potential of the discovery. A “drop” decision was made in July 2011.

SYNOPSIS

The Garnet Field is located on Block 44/27a under Licence P.517 issued in June 1986 as part of the

9th round of licensing and has been through various partnerships since. The original licence

extended into Block 44/27b. Ithaca Energy UK (Ltd) acquired an interest in Block 44/27a as well

as the operatorship from GDF SUEZ E&P UK in December 2010 as part of a broader deal.

Centrica North Sea Gas Ltd retained 31.67% interest in the block at this time.

The Garnet Field is a gas discovery located in Block 44/27a and is situated approximately 15 km

east of the Schooner Field (Fig 1). The field lies in the Carboniferous Play Fairway of the Southern

Gas Basin approximately 155 km to the northeast of the Theddlethorpe Terminal. The water depth

is approximately 72 m.

The only remaining feature of interest in Block 44/27a is the Garnet gas discovery. The

accumulation was discovered in 1986 by the Lasmo operated exploration well 44/27-1 which

encountered a 33ft thick gas column in the Upper Ketch above a GDT at 13165ft TVDSS. MDT

pressures and samples were taken and the well tested at 2mmscf/d.

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Subsequent evaluation of this discovery has encountered difficulties in establishing a reliable GRV

due to a) poor seismic imaging, b) uncertainties in the depth conversion and c) net to gross of the

Ketch reservoir. The volumes for the Garnet Field are mapped as being too small and risky to do

further work. The partnership decided to relinquish the block.

Fig 1. Location of Block 44/27a

EXPLORATION ACTIVITIES

The Garnet Field is covered by merged 3-D seismic data sets which were latterly reprocessed by

GXT in 2003/2004 with both PreSDM and PreSTM volumes now available. As well as the

discovery wells a regional set of wells from adjacent areas and covered by the seismic were

available for Ithaca Energy’s evaluation.

The main purpose of the evaluation was to improve the understanding of, and quantify the

uncertainty in, GIIP. The results clearly show that the key uncertainties in the determination of GIIP

for Garnet as being a) the depth mapping of the reservoir and b) uncertainty in the distribution and

connectivity of the reservoir sands within the gas bearing area of the accumulation.

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PROSPECTIVITY ANALYSIS IN BLOCK 44/27a

Block 44/27a is located in the Silverpit Basin in the Southern North Sea. In the Silverpit area,

principal sections of interest are the fluvial distributary channel deposits of Westphalian C/D age,

comprising of the Lower Ketch 1, Lower Ketch 2 and Upper Ketch Formations. The Lower Ketch

formations consist of continental, alluvial-fluvial channel sandstones and shales that thicken to the

southeast. The deeper Westphalian B, Westoe Coal Formation is principally composed of non-

reservoir shales and coals, some of which act as a source rock in the area.

The Garnet Field was discovered in 1986 by Lasmo with exploration well 44/27-1. The well is a

P&A gas well drilled to TD at 16,500 ft MD. A DST was run at between 13,426 ft - 13,442 ft and

13,280 ft – 13,314 ft MD; the well tested at a disappointing 2.43mmscfd. An evaluation of the test

suggested that the poor flow rates were the result of formation damage as a high positive Skin (+25)

was recorded over the upper tested interval; flow rates from the Garnet Field could therefore be

potentially higher than those recorded in the test.

The Garnet structure is a northwest-southeast trending fault block (Fig 2). The structure is fault

closed to the southwest and dip closed in all other directions, with the largest fault running

northwest-southeast along the southwest side of the structure (Fig 3). The greatest relief resides on

the southwest side. The accumulation naturally splits into a Garnet South-East and Garnet North-

West structure (the smaller of the two structures); divided by a narrow saddle or depending on the

interpretation a NE-SW trending non-sealing fault (Fig 2).

The Garnet Field reservoir is mostly comprised of sands within the Upper Ketch Formation with

Lower Ketch 2 Formation sands entering the gas leg in the fault-bounded pop-up area on the

southwest side. The Upper and Lower Ketch Formations consist of fluvial, low-sinuosity

channelised sandstones, considered to flow broadly north-south to northeast-southwest across the

Southern Gas Basin. The setting appears to be located in a more distal area to the main distributary

pattern and is likely to have lower net to gross ratios than seen in other areas. The reservoir section

in 44/27-1 has low net to gross ratios with an average of 28%, porosities are broadly in the range of

9% - 11%.

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There is some uncertainty around the interpretation of the FWL and GWC. RFT data from the

Garnet discovery well and nearby offset wells indicate the presence of a regional water gradient and

confirms a common aquifer with the nearby Schooner Field. This gradient, in combination with the

three pressure points from the definitive gas leg in 44/27-1 and a gas gradient determined from

nearby offset wells gives a FWL of 4016.3m (13177ft) tvdss. This has been taken as the Most

Likely GWC and has been used in the volume calculations for the base case.

No other prospects have been identified in the block.

RESERVES SUMMARY

Base Case GIIP volumes are provided below for the Garnet Field. The key uncertainty identified is

the gross rock volume (GRV) input into the volumetric calculation. There is significant uncertainty

associated with depth conversion. This is caused by the lateral velocity variations which result from

the significant salt swell / withdrawal event across the area.

The other key uncertainty is the net to gross ratio of the Ketch reservoir units. Low net to gross

ratios were recorded in the well 44/27-1. Experience in other fields suggests that connectivity is

compromised at these levels and recovery can be significantly lower than predicted.

Garnet Gas Discovery

Type: Tilted Fault Block with Westphalian C/D Upper and Lower Ketch sandstone reservoir. Risks:

� Structure: The Garnet reservoir structure is formed by a combination of dip closure and crestal erosion of the Base Permian unconformity (Fig 2). Seismic imaging (Fig 3) and depth conversion is poor and there is a moderate risk on GRV estimates (0.7)

� Source/Migration: Proven to work. (1.0) � Seal: Proven to work. (1.0) � Reservoir: Westphalian C/D Upper & Lower Ketch 2 channel sands. Net to

gross ratio is poor and poor connectivity may be a risk. Reservoir risk is moderate. (0.7)

Overall Risk = 0.5

Volumes within Block 44/27a (SE & NW areas):

Gas in Place: P90 22 bcf

P50 51 bcf P10 113 bcf

Relinquishment Report P.517, Block 44/27a August 2011 Page 5

Fig 2. Base Case Upper Ketch depth map above 13176ft GWC

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Figure 3. SW - NE, PSDM Seismic Line across the Garnet Discovery through 44/27-1.