Lansdowneoilandgas.com

Petroleum Prospecting Licence
Non-Exclusive licence to explore anywhere in the Irish Continental Shelf that is not the subject of any other licence. Practically this entitles a company to undertake seismic surveys.

Licensing Option
Gives the holder an exclusive right to apply for an Exploration Licence

• for a defined period
• in return for undertaking an agreed work programme.

Exploration Licence
A “Standard” licence covers an agreed work programme in water less than 200m. The work programme usually includes an exploration well. The licence period is 6 years.

A “Deepwater Exploration” licence covers an agreed work programme in water deeper than 200m. The work programme usually includes an exploration well. The licence period is 12 years.

A “Frontier” licence covers an agreed work programme in areas where the Minister has declared the area to be a “Frontier” area. The work programme usually includes an exploration well, but the licence period is generally longer than other licences (minimum 15 years).

Lease Undertaking
Gives the holder an exclusive right to apply for an Petroleum Lease

• for a defined period
• in return for undertaking an agreed work programme.

Petroleum Lease
Gives the holder an exclusive right to produce hydrocarbons for an agreed period.

IRISH ENERGY

Gas
The two principal gas discoveries made to date offshore Ireland are Kinsale Head (by Marathon) and Corrib (by Shell).

Kinsale Head
The Kinsale Head gas field was discovered by Marathon in 1971 and continues to be operated by Marathon. It delivered its first gas in 1978. Total recoverable reserves were recently estimated at about 1.65 tcf of natural gas. The smaller Ballycotton gas field and Southwest Kinsale gas field were discovered by Marathon and came on stream in 1991 and 1999, respectively, with total recoverable reserves estimated at about 55 bcf and 28 bcf respectively. By the end of 2002, 1.6 tcf had been produced from the Kinsale Head gas field and it is anticipated that production will continue at declining rates through to at least gas year 2011/2012. The Kinsale Head gas field development is comprised of two fixed steel production platforms, Alpha and Bravo, an onshore gas receiving station and 38 miles of 24-inch pipeline connecting the platforms to the shore.

Any further discovery of commercial gas in the Celtic Sea should help to prolong the economic useful life of existing Kinsale Head infrastructure.

Corrib
The Corrib field, located off the West coast of Ireland and operated by Shell, is due to commence gas deliveries in 2007/2008. Total recoverable reserves have been estimated at about 1 tcf of natural gas.

Ireland’s oil and gas infrastructure
The Irish gas transmission system currently consists of a line which runs South-North from Cork to Dundalk, North of Dublin. A major expansion was completed in 2003 which linked Dublin with Galway and Limerick and completed a national ringmain by connecting with the existing Dublin, Cork and Limerick networks. In addition, there are plans to build a link line from the Corrib field development into the loop at Galway.

In order to keep pace with Irish domestic gas demand, the Interconnector, an offshore transmission pipeline running from Moffat in Southwest Scotland to North of Dublin became operational in 1993 linking the Irish and UK gas networks. A second pipeline, Interconnector 2, which runs parallel with the Interconnector, has recently been completed and provides further capacity and security of supply to meet increasing domestic demands in Ireland. Both Interconnectors are owned and operated by BGÉ. Northern Ireland is supplied with gas by the Scotland/Northern Ireland Pipeline System, which was commissioned in 1996. A pipeline to link Derry to Belfast was completed at the end of 2004. In addition, a pipeline connecting Dublin and Belfast is scheduled for construction in 2006.

Oil
Oil continues to be the most important fuel in meeting Ireland’s energy needs. In 2000, oil accounted for 56.5 per cent. of Ireland’s Total Primary Energy Supply and demand for oil increased at over 5 percent. per annum through the 1990’s.

There is currently no indigenous production of oil in Ireland or from the Irish Continental Shelf.

There is one oil refinery located at Whitegate, County Cork, with a capacity of 75,000 bpd (approximately 40 per cent. of Ireland’s current fuel requirements) and this is operated by ConocoPhillips. There is also a deepwater crude oil and oil products storage facility at Bantry Bay (Whiddy Island), County Cork, also operated by ConocoPhillips. Global oil prices reached record high levels during 2005 and have risen steadily since 2002, driven by rapidly increasing demand from growing economies such as China, limited additional production capacity coming on-stream and certain other environmental and political factors which have influenced prices. The predicted trend for oil prices remains strong.

PROJECTS

Donegal (Non-Operator – 19.25 per cent. interest carried through exploration well)
The Donegal acreage lies around 70 km off the Northwest coast of Ireland, offshore County Donegal, in water depths of less than 125m. This acreage was originally awarded as a Licensing Option in 2000 and this has now been replaced by the Donegal Licence which is valid until 19 January 2020, unless surrendered or revoked before that time. Current mapping has identified a large four-way dip closed anticline at Sherwood Sandstone level named Inishbeg. Under the terms of a farmout agreement all of Lansdowne’s costs associated with the drilling and testing of an exploration well to test the hydrocarbon potential of the Inishbeg prospect are to be carried by subsidiaries of Island and Petroceltic. Under the terms of the Donegal Licence, the Inishbeg well is required to be drilled by 20 January 2007 and Lundin, the Operator of the Donegal Licence, has commenced well planning work for the drilling of the Inishbeg well which is expected to start in the second quarter of 2006.

There are additional opportunities present on the Donegal Licence acreage – the Inishtrahull prospect and a lead in the west of the acreage, both of which have been mapped at the Triassic Sherwood Sandstone level.

The prospect is being gas sourced from the Carboniferous trapped in Triassic reservoir sands, is analogous to that proven by the Corrib field in the Slyne Trough, some 200km on trend to the Southwest of the Donegal Basin, and the numerous gas fields in the East Irish Sea Basin, the largest of which is the Morecambe complex, estimated to contain 6.45 tcf of gas reserves.

In the East Irish Sea Basin, oil has also been discovered in Triassic reservoirs, believed to have been sourced from Carboniferous Namurian shales, while other wells drilled in the Slyne Trough have found oil shows believed to be associated with Lower Jurassic shales. Both of these potential oil source rocks are believed to be present in the Donegal Basin and as a result, whilst gas is considered the most likely hydrocarbon phase for the prospects being targeted in the Donegal Basin, the possibility of finding oil cannot be ruled out.

Celtic Sea
Lansdowne holds four assets in the Celtic Sea, lying in water depths of generally less than 100 m. This portfolio has been built up with the overall strategic objective of identifying gas prospects, which if successful, could be produced through a tie-back into the existing Seven Heads and Kinsale infrastructure, subject to access rights being agreed. Three of the assets are considered as gas plays – the Midleton Licensing Option, the Rosscarbery Licensing Option and the East Kinsale Licensing Option.The proximity of the existing infrastructure means that even a modest gas discovery (c 20 bcf in the area could be commercially viable. The Ballycotton field (c55bcf) was put into production in 1991 when gas prices were significantly lower than the present day. In addition Lansdowne holds the Seven Heads Oil Licensing Option over the deeper Cretaceous Wealden oil bearing reservoirs (restricted to a depth below approximately 1,250m sub-sea in the Seven Heads acreage.

Midleton (Operator – 100 per cent. interest)
The Midleton acreage comprises the southern parts of Blocks 49/11 and 49/12 and lies approximately 20 km Northeast of the Kinsale Head and Ballycotton gas fields, in water depths of less than 100 m. The Midleton Licensing Option expires on 31 December 2006.

The producing reservoir in the Ballycotton field is the Cretaceous Greensand, or A Sand, which is also the case for the main reservoir in the Kinsale Head gas field. The Greensand is also the prime reservoir target in the Midleton concession and has been established to be present with good reservoir quality by the 49/11-1 and 49/11-2 wells. During 2003 an experimental shallow seismic programme was carried out to improve imaging at shallow depths. Mapping of this new data and integration with previously acquired data has led to the identification of a number of promisingstructures, one of which (the Midleton prospect) has been selected for working up for drilling. A seismic reprocessing project is planned to finalise the details of the trap and to assist in locating an exploration well. All the structures within the Midleton concession are within sub-sea tie-back range of existing facilities.

Source, reservoir and trap are all considered by Lansdowne to be low risk elements of the Midleton prospect, with the key risk remaining being the sealing capacity of the northern bounding fault.

The development concept consists of a single vertical sub-sea producer tied back to the Ballycotton gas field, some 20 km from the Midleton prospect, from where the gas would be piped to the Kinsale Head gas field which has compression facilities.

Rosscarbery (Operator – 77 per cent. interest)
The Rosscarbery acreage lies in water depths of less than 100 metres. The Option currently expires on 31 December 2006. The Galley Head discovery well (48/18-1), lying in the Northeast part of the Rosscarbery Licensing Option acreage and drilled by BP in 1985, tested gas at 13.7 mmscfd from the Lower Cretaceous Greensand reservoir. In post-well evaluation studies, BP identified a number of other structures, with the main prospect being what is now called Rosscarbery.

Since award of the Rosscarbery Licensing Option, a re-mapping of the Rosscarbery prospect has confirmed its potential. Rosscarbery is a well defined structure with closure to the South formed by a large down to the basin (South) fault that will juxtapose ‘A’ sands with chalk and dip closure is mapped to the West, North and East. Should the fault throw remain consistent then the Wealden Sands are more likely to be juxtaposed against the Gault Clay. The Rosscarbery prospect is within sub-sea tie-back range of the existing Marathon facilities.

East Kinsale (Operator – 100 per cent. interest)
The East Kinsale acreage lies some 20 km to the East of the Marathon operated Kinsale Head gas field. The East Kinsale Licensing Option expires on 31 December 2006. Work carried out to date has consisted of mapping the available 2D seismic data, which has identified a number of leads. A seismic reprocessing project is planned to improve existing reservoir imaging. The East Kinsale acreage is within sub-sea tie-back range of the Kinsale Head gas field. The key prospect in the East Kinsale acreage is at the lower Cretaceous level (49/17-W) lying to the east of the Kinsale Head gas field and to the south, and updip of, the 49/17-1 exploration well.

Seven Heads Oil (Operator – 74 per cent. interest, reducing to 29.6 per cent. pursuant to a farm-out option)
The Seven Heads Oil Licensing Option acreage lies beneath the Seven Heads gas field, with the boundary between the two concessions lying at approximately 1,250m sub-sea. The Seven Heads Oil Licensing Option expires on 31 December 2006. Within the acreage, oil was successfully tested from three exploration wells which achieved flow rates of between 1,300 and 1,600 bopd. The reservoir sands are in the Cretaceous Middle and Lower Wealden sequences from 1,400 to 2,300 m below sea level. The oil is light (39 to 42 degrees API) but contains relatively high wax contents ranging from 12 per cent. to 22 per cent. wax, which could require treatment to avoid production difficulties.

Through a phased development the prospect could be tied-back to a wellhead production platform with the oil being transferred to a leased FPSO. A farm-out has been granted to Island in relation to the Seven Heads Oil Licensing Option which, if effected, would leave the Group with a 29.6 per cent. interest in the Seven Heads Oil Licensing Option.

The Group is in the process of seeking farm-out partners for the Midleton, Rosscarbery and East Kinsale Licensing Options. Presentations have been made to a number of interested parties who have entered into confidentiality agreements and following dataroom visits, detailed evaluations are continuing. It is planned that this farm-out process will be concluded during 2006 and that, if supported by further technical work and farm-out arrangements are put in place, applications will be submitted to the PAD to convert all or part of the areas covered by the Midleton, Rosscarbery and East Kinsale Licensing Options into Exploration Licences, with the likelihood that wells will be committed for drilling within the first two years of such Exploration Licences, during 2007 and/or 2008. In certain limited instances, the Group intends to utilise part of the net proceeds of the Placing to fund a proportion of the drilling costs and thereby maintain a higher interest in the respective block.