E N V O I

(Energy Venture Opportunities International)

Project Synopsis P139

Offshore Sydney Basin

Eastern Australia
License PEP 11
MEC Resources Ltd

August 2007

P139 Sydney Basin SE Australia

ENVOI

activity occurred prior to the advent of seismic, 41%

of the wells drilled flowed some gas on test.
Recently there has been a resurgence of activity
with a number of companies successfully drilling for,
and developing, coal bed methane reserves
onshore.

Oil seeps & new seismic

confirm new large totally
undrilled offshore play with
huge upside (OGIP 5+ Tcf),
adjacent to largest market
in Australia.

Hardly any modern exploration activity has

taken place offshore, which remains totally
undrilled and is therefore considered an
overlooked basin containing all the elements for
success in world class sized structures. It was
this potential that MEC recognised when they
farmed into the acreage position in 2006. Not only
did they recognise that large gas reserves might be
present but the proximity of the ready Sydney
market would ensure above average sales and low
economic thresholds for even relatively small
reserves as low as 200 Bcf recoverable.

MEC Resources Ltd and subsidiaries (MEC)

EXECUTIVE SUMMARY
Introduction: In December 2006, MEC farmed into
permit NSW/PEP 11 (PEP 11) and has so far earned
25% interest by acquiring new seismic and confirming
the hydrocarbon potential of their acreage in the
Sydney Basin offshore New South Wales in SE
Australia. The offshore remains totally undrilled to
date even through PEP 11 is situated in shallow
coastal waters immediately offshore east and north
east of Sydney and Australias largest energy market
and particularly gas.

The potential of the permit is enhanced with the

analysis of Landsat seep data which shows
repeated active oil seepage occurs over the main
Baleen South prospect. As a result, although gas is
expected, the possibility of a new oil play offshore
can not be ruled out!

MEC has the option to increase its interest to 85% by

drilling one well and would like to bring in a partner or
partners to drill the well for a significant proportion of
its ultimate interest. Bounty Oil & Gas Ltd will
maintain a 15% interest and would relinquish
operatorship to a suitably qualified incoming company
if appropriate.

Work Programme: MEC is now keen to progress

the exploration of this prospective offshore play
based on the results of re-mapping including
reprocessed seismic data and the new 1,450 km of
modern 2D data acquired in 2004. This has
confirmed several large structural traps within the
permit which are significantly associated with the
seeps.

A significant amount of geological and geophysical

work has been carried out since its award to Bounty
in 2002 which has much improved the regional
Sydney Basin play model and its prospectivity,
particularly offshore where the Permian is closer to
the likely sediment source and where undrilled. An
active hydrocarbon system is also evidenced by
active offshore oil seeps and both oil and gas shows
in wells drilled into the Permian onshore. Significantly
gas has also been tested in modest quantities in two
wells near the coast (Ref: Montage).

Potential: The combined total most likely reserve

for the permits 7 prospects and leads is now
estimated to be in excess of 5 Tcf of gas in place.
Should an oil play be established most likely oil
reserves could be huge. The largest prospect,
Baleen, has estimated most likely recoverable
reserves of 1.2 Tcf (675 mmbbls equiv).

Value: Economic estimates indicate that even small

Large untested offshore potential, proximity to

infrastructure, the ready Sydney and NSW gas
markets, ongoing oil seeps and 1,450km modern 2D
seismic now makes this a very attractive exploration
opportunity.

gas accumulations of less than 200 Bcf recoverable

would be commercial with current pricing while a
field containing 1.2 Tcf would generate a project
NPV@10% of US$ 600 million and a rate of return
in excess of 100%.

Play Overview: The region's proven Palaeozoic and

Mesozoic potential is dominated by Triassic and
Permian sandstones with interbedded gas generating
coal measures. Up until now, exploration has been
concentrated solely onshore where gas was first
discovered in 1885 in the Narrabeen-1 well.
Amazingly, even though most of the exploration

Terms: MEC is offering an incoming party or group,

a 60% interest in the permit by funding the first well.
MEC would consider offering a smaller interest on
the basis of paying 10% for each 6.0% earned. The
current estimated well US$ 11 million, excluding
mob/demob and depending on rig availability.
1

P139 Sydney Basin SE Australia

ENVOI

described below is based on an integration of

published reports, onshore well data and offshore
seismic data:

Large totally unexplored

offshore coastal basin with
active oil seeps & proven
hydrocarbon system onshore.

Basin Evolution: Several pulses of foreland basin

subsidence and sub regional thrusting have occurred
from Carboniferous to the present day but the
geological history of the sedimentary basins can be
broadly divided into four phases of subsidence,
separated by at least four phases of uplift.

Exploration History: The basins around Sydney have

been known to be coal bearing for nearly two centuries.
Coal has been mined for 175 years from the Newcastle
coalfields in the Hunter Valley area while more recently
several companies have successfully produced coal bed
methane in the Sydney Basin onshore. Between the
turn of the last century and 1970 over 80 exploration
wells were drilled here. Records from 68 of these were
reviewed by Sydney Oil Company (not related to
Sydney Gas) which noted that 41% had flowed gas
though mostly in small quantities. Two oil exploration
wells were completed in 2000, namely Glenmore-1 and
Fairlight-1 both found residual oil shows in Triassic and
Permian sandstones at depths ranging between 580m
and 830m.

Phase 1 Early Permian (Foreland basin

development): After an extensive period of rifting and
volcanism in the Carboniferous, the earliest Permian
sediments were deposited in a north- south oriented
Sydney Basin following a marine transgression.
Transgressive sandstones are locally preserved below
the shale and siltstone dominated sediments of Lower
Dalwood Group. A WNW-ESE oriented thrust then
propagated from the north of the region, now known as
the Hunter or Peel Thrust, which provided uplift and
the clastic sediment input into the subsiding foreland
basin.
To the north east, the Greta Coal Measures prograded
into the basin passing laterally into, and over,
shoreface sediments called the Farley Formation.
Around the primary Baleen South prospect the Farley
Formation grades upwards into the Greta Coal
Measures and forms the oldest likely reservoir. In
addition to the reservoir potential of these sandstones,
the interbedded coals form an excellent gas source.
Increased marine influence at the top of the Greta
Coal formation created the environment for more oil
prone source facies to be developed and preserved.

Offshore, though naturally occurring oil slicks have been

a known phenomenon for decades, and more recently
confirmed by satellite analysis, no exploration wells
have so far been drilled!
The PEP 11 permit area offshore was originally held by
Sydney Oil Company who shot over 1,700 kms of 2D
seismic data in 1981. Santos and Ampolex held the
same license area between 1989 and 1992, known then
as permit NSW P/10, when they acquired an additional
605 kms of 2D seismic data and reprocessed 1,742 kms
of the original 1981 Sydney Oil Company data. Neither
Group drilled any exploration wells. Flare Petroleum
was subsequently granted the current area, NSW/PEP
11 (referred to as PEP 11) on July 24th 1999 for an initial
term of 6 years. After several extensions, the permit is
currently in its 5th permit year where a well is next
requirement. Bounty acquired the acreage in 2003 and
farmed out to MEC in 2006 which is now progressing
the exploration effort.

Following a marine transgression towards the end of

early Permian times, the basin wide Branxton shale
Formation was deposited and now forms a suitable
seal for the underlying Farley and Greta sandstones.
The Muree Sandstone which was subsequently
deposited in a shallow marine, shoreface environment
on top of the Branxton Shales, now forms the main
reservoir in the Baleen South prospect. The new play
model indicates that the development of these
Permian shallow marine clastics could also be
enhanced in their present offshore location to those
in some of the onshore wells which are thought to
be more distal from predicted sediment source to
the north east where wells indicate better reservoir.
Porosities averaging 15% are expected in the Muree
Sandstone in PEP11 with good permeability
depending on the diagenetic history of the area. Seal
for the sandstone is provided by the Mulbring Siltstone
which also has potential as a wet gas source facies.

Large
totally
unexplored
offshore coastal basin with
active oil seeps & proven
hydrocarbon system.
Sydney Basin Evolution & Petroleum
Geology: The geological evolution of the Sydney

Phase 2 Late Permian (Foreland basin

development): The mid Permian Hunter Orogeny
was an important period of compression and erosion.

Basin is well controlled onshore but still poorly

understood offshore, due to the lack of well data and
also its complex structural history. The basin evolution

P139 Sydney Basin SE Australia

ENVOI

Previous work on the block based on old data is not

thought to have resulted in the identification of suitable
drillable prospects. Only by careful reprocessing of
seismic data and a thorough integration of all of the
available information has it been demonstrated that
ALL of the elements appear to exist for a new
productive hydrocarbon play area in PEP 11.

West north west verging thrusting and high angle

reverse faulting resulted which was responsible for
creating the large Baleen structure in PEP 11. (The area
had been a remnant Carboniferous high in the earliest
Permian). The compression was also responsible a
west north west oriented extensional feature known as
the Newcastle Syncline (ref: Regional map on the
attached montage). Coal Measures of the Lower and
Upper Tomago Formation and the Newcastle Formation
complete the Permian stratigraphy which was deposited
in a delta system that prograded from the north east into
a marine basin centred on present day Sydney. Each
Formation was separated by a brief marine
transgression and the deposition of a relatively thin
shale sequence.

There is now a total of 1,450 km of new 2D seismic

data, and 2,345 kms of older 2D seismic data available
for interpretation within the permit area. Nearly half of
the old seismic has been reprocessed, concentrating
on the northern area around the Baleen prospect.
Integrating a detailed review of the onshore geology
with their interpretation offshore has resulted in a
marked upgrading of the prospectivity of PEP-11.

Phase 3 Triassic (Passive subsidence): After coal

measure deposition, a non marine sequence of alluvial
fans, fluvial sands and estuarine shale was laid down as
the Narrabeen Group. This Group, though important
onshore, is largely eroded over much of PEP 11 and is
therefore of little significance to the offshore exploration.
As a result, very little rock record now remains in the
onshore Sydney Basin to properly understand the
geological history of the Triassic in the area. Based on
more regional evidence, however, it is likely that the
main phase of structure formation in the offshore
occurred during the Late Triassic. An alternative is that
deformation happened in the Mid Cretaceous when the
Tasman Sea rift began to form, which led to the
separation of Australia, New Zealand and Tasmania.

The main reservoir targets are the Late Permians

Muree Sandstone Member, which is sealed by the
Mulbring Siltstone, and the deeper Greta Sandstone,
which is sealed by shale in the Branxton Formation.
Both of these sealing strata are also considered
potential wet gas-prone source rocks that may be
mature in the Newcastle Syncline present day.
Significantly, repeatable Landsat satellite seep studies
offshore in the mid 1990s showed sea surface oil
seeps over and around the Baleen prospect which is
more exclusive proof that the area has a mature and
actively generating source system.
Currently 7 prospects and leads have been identifield
in the PEP 11 permit, which may contain up to 5 Tcf
gas (or hundreds of millions of bbls oil). The Baleen
prospect is considered to be the best candidate for the
first ever offshore well in the region subject to drilling in
2009.

The possibility of Jurassic and Early Cretaceous

sedimentation exists although seismic indicates that
these sequences offshore in PEP 11 have been eroded.

Phase 4 Tertiary (Subsidence): What Tertiary

sediment is still present, confirms an important period of
Tertiary passive margin subsidence occurred which
resulted in at least 500 metres of sediment being
deposited in the Newcastle Syncline. The effect of this
deposition has been critical to the renewed
generation of hydrocarbons which would have
enabled any Triassic aged structures to have received a
late charge.

The Baleen Prospect is a faulted 4-way dip-closed

anticline both at the mapped Base Permian horizon
and at markers within the Early Permian section. The
main target is the Permian Muree Sandstone which
has a mapped closure of over 20,000 acres. Most
likely reserves for this is some 1.2 Tcf recoverable or,
in the case of an oil discovery, 675 million bbls
equivalent. Should more than one horizon be sealed,
which is quite possible, this reserve figure could
increase significantly.

Well defined gas prospects with

large upside (OGIP 5 Tcf) &
evidence for oil potential.

Other structures also have large reserve potential. The

Baleen SE structure could contain most likely
recoverable reserves of 768 Bcf. Five other leads
identified in PEP 11 could hold an additional 1.48 Tcf
recoverable reserves between them.

PEP 11 Block Potential:

The PEP 11 permit

lies on the eastern side of the Sydney Basin and is
boarded to the west by the edge of the oceanic crust.
Water depths vary from 40 metres to over 200 metres
offshore.

Permit PEP 11 could therefore contain cumulative

reserves in excess of 3 Tcf of gas or several billion
barrels of oil recoverable.

P139 Sydney Basin SE Australia

ENVOI

(US$1.04) per Mcf, reserves as low as 200 Bcf could

be economic (if developed as a sub-sea tie back to
mainland facilities). Should the most likely 1.2 Tcf
recoverable reserve case be found in the Baleen
prospect, the estimated NPV @ 10% could generate
an estimated US$ 600 million, giving a rate of return of
around 100%.

Moderate drilling costs give

exposure to high value
potential
Obligations & Work Programme:

The
permit is currently in the 5 permit term where
commitment to an exploration is now required to retain
the permit. Several extension have already been
granted by the Australian authorities, with a further
extension required to allow the well to be drilled before
the end of the current term An extension has been
applied for where MEC is currently negotiating a rig
contract and expects to have a rig secured to drill the
well in 2009. Estimated costs for a well to around 1,600
meters is US$ 11 million dry hole (but excluding mob
/demob) and depending upon rig availability.
th

Simple deal terms for entry

into high potential, high
reward permit.
Deal Terms:

MEC is now seeking a company or

partnership of smaller companies, (if several smaller
companies, unable to consider a large percentage,
demonstrate an interest in the project), to help further
the exploration of the PEP 11 permit. Up to 60%
working interest in the project is on offer to a company
(or consortium) willing to fund 100% of the costs of
drilling one well to a depth of approximately 1,600
meters. This is currently estimated to cost around US$
11 million (dry hole), excluding mob/demob.

Largest Australian market and

demand for gas immediately
adjacent to Permit area

MEC is requesting a very modest contribution to past

costs but is willing to discuss participation based on
increments of 6.0% working interest for every 10% of
the well costs committed.

Commercial Summary:

Fiscal System - PEP

11 is held under the Australian federal tax based system
which compares very favourably with other politically
stable hydrocarbon producing countries around the
world. The terms are based on a royalty, Petroleum
Resource Rent Tax (PRRT) and income tax which
equates to an average net contractor take of 45%.

Global access to Online data

room available for immediate
review

Transportation - Gas pipeline infrastructure exists

immediately onshore linking Newcastle to Sydney, less
than 40 kms from the Baleen prospect. This would give
access to a total customer and business population of
over 5 million people. With continued uncertainty over
gas supplies from the north (Timor Sea and Papua New
Guinea), securing a large local gas supply for New
South Wales is of strategic and economic importance.
With reference to a NEWS RELEASE in February 2007
Papua New Guinea pipeline NOT to proceed this only
increasing the opportunity and value for newly
discovered local reserves. A discovery of large gas
reserves in PEP 11 would be very significant in this
regard.

Additional Information:

Review of much of
the key data is available for immediate review online
being hosted by EzDataRoom.com where access
will be authorized after execution of the
Confidentiality Agreement. A subsequent presentation
and reviews of the hard copy data can be arranged
with MEC in their Perth office. All initial contact is to be
via Envoi.
Contact: Mike Lakin
Envoi Limited
11 Cowper Road, Hanwell,
London W7 1EL,
United Kingdom

Demand According to the latest estimates from the

New South Wales government, power demand is
expected to increase by 25% by 2010. Much of that
increased demand will be met by new gas fired power
stations in an attempt to limit greenhouse gas
emissions. Conservative estimates suggest 1,500MWs
of additional capacity is required but demand could be
as high as 3,000MW. This is equivalent to a gas
requirement of 400 to 800 Mcf gas per day.

Tel
Fax
E

: +44 (0)20 8566 1310

: +44 (0)20 8566 1312
: mail@envoi.co.uk

AN ACROBAT VERSION OF THIS SYNOPSIS IS AVAILABLE

FOR REVIEW ON THE ACTIVE PROJECTS PAGE OF
ENVOIs WEB SITE

www.envoi.co.uk
Disclaimer: The information in this memorandum is for guidance only. Neither Envoi Limited (Envoi), or MEC nor any director,
officer or employee of Envoi or MEC accepts responsibility for or makes any representation or warranty, express or implied,
with respect to the accuracy or completeness of the information, estimates and opinions contained in this document. This
document does not constitute an offer, and neither this document nor the information, estimates and opinions contained in it
shall form the basis of any contract. Companies wishing to acquire an interest in the project will be expected to make their own
review of all documents and form their own judgements entirely.

Economics Based on a modest 20 Mcf per day flow

rate per well and a conservative gas price of A$2.00
4

DEPTH (Km)

1
2
3
4

Coastline

TRIASSIC

C
I

WEST
SE

SINGLETON GP

BRANXTON
FM

SEISMIC CROSS SECTION (LINE SY91-15M : REPROCESSED)

BALEEN
PROSPECT

TERTI

ARY

BASEMENT
(CARBONIFEROUS)

RUTHERFORD
FM
ALLANDALE FM
LOCH INVAR
FM

LANDSAT SEEPS
PEP 11

RESERVOIR

PROSPECTS

SOURCE

CROSS SECTION

SEAL

A SEISMIC SECTION

EXISTING WELLS / SHOWS

GAS PIPELINE

EAST

PREPARED
BY

ENVOI
(Energy Venture Opportunities International)

1
TOP OIL
WINDOW

LOWER
PERMIAN

FARLEY
FM

UPPER
PERMIAN

?
S

KEY :

MAP SHOWING REGIONAL

PROSPECTIVITY OF PEP 11 PERMIT
IN NORTHERN PART OF SYDNEY
BASIN

BALEEN
PROSPECT

MAITLAND GP

50km

100km

PEP-11 PERMIT
ACTIVE
LANDSAT SEEPS

NW

REGIONAL
LOCATION MAP
OF S.E AUSTRALIA

152

LAT E

S
A
I

Woronora-1

(CSM & Oil Shows)

E A R LY

T
N
A
I
M

O
C
T

pth

O c e a n

200mS
Wate
O r De

S
151

P a c i f i c

D
Y

WOLLONGONG

LAT E

S
T.
EE

M
UR

O c e a n

DALWOOD GROUP

E
I

TOMAGO
C.M.
MULBRING
SILTSTONE
MUREE SST

GRETA COAL
MEASURES

P a c i f i c

SYDNEY

Most Likely
Est. 1.2 Tcf rec

NEWCASTLE
C.M.

CARB.
(STEPHANIAN)

(Flowed 1mmcfd U.Permian)

I
ED
IT OF
PA L A E O S

EN

E
D

BALEEN
PROSPECT

OF

O
N

E A R LY

NE
F

N
R
R

LIM

Balmain-1

H
T

FT
LI

LI
O

LT

ACTIVE LANDSAT
SEEPS

ITI

(Oil Shows in Cores)

UP
RE
HO

FS
OF

PEP 11

E
CLIN
SYN
RE
SHO
OFF

SYDNEY

34

Terrigal-1A

NE
W
C
SY
NC AST
L
LI
NE E

BE

B A
S I
N

E Y

KURRAJONG
FAULT

LITHGOW

NEWCASTLE

LD

NE
SY WC
NC AS
LI TL
NE E

NEWCASTLE

AN
Y
DG

LAPSTO
NE
MONOCL
INE

U
RIC
CO

FO

HYDROCARBON
PETROLEUM
SCHEMATIC REGIONAL
OCCURRENCE
GEOLOGY
STRATIGRAPHY
SOUTH
NORTHERN SYDNEY BASIN

TERTIARY

SH

S
Y
B
D
A
N
S
E
I
N Y

VA
R
HIN
LO
C

AN
E
N N E
O
G
W
L
D L A
B N D
E
L
T

N
TIC
LI

PEP 11

WEST

ER
NT T
HU RUS
TH

32

TIC
LIN
E

VICTORIA

EN

NC

SYDNEY

FF

PERTH

AN

SY

N.S.W.

GL

AGE

P
OS

(Oil & CSM Shows in

Permian)

ST

SOUTH
AUSTRALIA

Jerry Plains-1

RU

EN

RE

BRISBANE

WESTERN
AUSTRALIA

I
D
SE
O
AE
PA L
T R A N S P OR T DI RE
C TI O

QUEENSLAND

TH

SUMMARY OF THE PETROLEUM GEOLOGY

OF SYDNEY BASIN

EM-1

(Flowed 18 mcfd U.Permian?)

ER

IA N

NORTHERN
TERRITORY

NT

NE

SYDNEY
BASIN

RM
L. PE

HU

MIDDLE

Timor
Sea

3
4

TOP GAS
WINDOW

SCHEMATIC CROSS SECTION

NW - SE ACROSS SYDNEY BASIN
4

BASE PERMIAN

MONTAGE SHOWING HYDROCARBON

PROSPECTIVITY OF PEP 11
SYDNEY BASIN,
OFFSHORE EASTERN AUSTRALIA
COMPILED BY : M.LAKIN
REF : P139 Advent (SydBasin) Mntg

August 2007
DRAFTOIL