Relinquishment Report. for. Licence P.1046 Block 20/2c

Relinquishment Report for Licence P.1046 Block 20/2c Submitted to DTI in September 2006 September 2006 1 of 14

CONTENT 1 - Introduction 2 - Exploration Activities 2.1 - Purchase 100km2 of Aker 1999 survey 2.2 Reprocessing of 3D Aker data 2.3 - Biostratigraphic Study extended from Buzzard to 20/2c 2.4 - Heavy Mineral Analysis Upper Jurassic sands 2.5 - Semi-regional structural reconstruction study 2.6 - Rock Physics Project followed by Seismic Inversion 3 - Prospectivity Analysis 4 - Reserves Summary and Chance of Success LIST OF FIGURES AND TABLES Figure 1: Location Map Figure 2: Aker1999 reprocessing Stack and migrated data areas Figure 3 : Aker 1999 3D Seismic Reprocessing Results Figure 4: Upper Jurassic Well Correlation Figure 5: Top Middle Volgian Ettrick Depth and Gross Isopach Map Figure 6: W-E Seismic Section through White Bear Lead tying 20/1-5 and 20/2-4 Table 1: White Bear/Black Cat Lower Terrace Ettrick Sandstone Reserves Table 2 : Geological Chance of Success for the White Bear/Black Cat Lower Terrace Lead September 2006 2 of 14

1 - Introduction Licence Number: P.1046 Licence Round: 20 th Round Awarded 25 July 2002 Licence Type: Traditional Block Number: 20/02c Equity Holdings: Nexen Petroleum U.K. Limited (Operator) 50.0000% Petro-Canada UK Limited 40.0000% Edinburgh Oil & Gas Plc 10.0000% Licence Work Programme Summary: Firm commitments: Acquire 100 square kilometres (full fold) of 3D seismic data within 1 year of the licence award Carry out Amplitude-versus-Offset analysis on the existing 3D seismic data Carry out a Rock Physics study Contingent commitments: Drill either the Black Cat Lead or White Bear Lead unless it can be shown that drilling either is technically not justified Licence P.1046 was relinquished on 24 th July 2006 at the end of the Initial Term of the Licence. Block 20/2c (Figure 1) was applied for in the 20 th Round on the basis of an Middle Volgian Ettrick sandstone stratigraphic play located west of the Ettrick Field (Blocks 20/2a & 20/3a) and downdip of the Buzzard Field (Blocks 20/1S & 20/6a). Two leads, Black Cat and White Bear, were mapped in the west of 20/2c and it was recognized at the time that they could both be part of a larger feature. All firm licence commitments have been met with the completion of a recent rock physics and AVO study which was carried out by Odegaard. Prior to this a significant, and highly successful, reprocessing effort had been made using the Aker 1999 regional spec dataset. This resulted in high quality seismic data across the Upper Jurassic section which enabled key picks such as the Top Middle Volgian Ettrick Siltstone and Top Early September 2006 3 of 14

Volgian Buzzard Sandstone to be made across the block with a high degree of confidence. The Black Cat well 20/7a-6 located in the adjacent block to the south and operated by Nexen was drilled in February 2006 as a tight hole. 2 - Exploration Activities: 2.1 - Purchase 100km2 of Aker 1999 survey 100 square kilometers of full fold 3D Aker 1999 seismic data were purchased in 2003 over block 20/2c, in order to define the White Bear and Black Cat leads. The data in the Upper Jurassic section appeared to be very noisy and the reflectors critical for the mapping of the leads showed a lot of discontinuity. Reprocessing of the Aker 1999 data started in 2003. 2.2 Reprocessing of 3D Aker data The Aker 1999 3D seismic reprocessing was completed by CGG in 2004. The full fold 3D stack and migrated areas are shown on Figure 2. Pre-processing paid careful attention to editing of noisy traces; correcting for variations in shot strength an/or receiver sensitivity and maximising resolution of data (zero phase/q phase only correction). A lot of effort was directed (pre- and possibly post-stack) towards the attenuation of multiples. As well as conventional xt and tau-p methods, typical UKCS processing sequence were used, including full Kirchhoff 3D PSTM. A true amplitude processing sequence was required to allow for any subsequent AVO investigation. A line comparing the original and the reprocessed version shows that there is significant improvement in the resolution and continuity of the Upper Jurassic section as well as far better noise attenuation (Figure 3). 2.3 - Biostratigraphic Study extended from Buzzard Field to 20/2c A revised Humber Group stratigraphy of wells 20/1-2, 20/2-4, 20/2-5 & 20/2-6 and correlation with Buzzard Field wells was carried out in 2003 by BVR International Ltd (Les Riley). The study revisited all previous biostratigraphical reports and some wells were resampled. September 2006 4 of 14

Three major sequences were identified in the Upper Jurassic (Figure 4): the Kimmeridgian-Early Volgian sequence (J56-J66B Maximum Flooding Surfaces of Partington et al, 1993) during which the Buzzard Sands were deposited, the Middle Volgian sequence (J66B-J73B MFSs) including the Ettrick Sands and the Late Volgian- Early Ryazanian sequence (J73B-J76 MFSs) corresponding to the Burns Sand unit. In Well 20/1-2, both Burns and Ettrick sandstones are interpreted to be present. The presence of water wet Ettrick Sand up-dip of White Bear increases the risk on the lead western stratigraphic closure. However, pressure data and petrographical analysis from well 20/1-2 indicates that Ettrick Sandstones present in this well are most likely unconnected to the White Bear/Black Cat Prospect area. Ettrick sandstones in 20/1-2 are interpreted to be derived from a local sediment source, whereas sands in the 20/2c area could be sourced from further to the west (i.e. the Buzzard area). 2.4 - Heavy Mineral Analysis Upper Jurassic sands Heavy mineral analysis (HM Research Asociates, 2004) was carried out for sediments sampled from Wells 20/1-2, 20/2-6 and 20/2-4 in order to compare relative provenances of Buzzard, Ettrick and Burns sand units. The second objective was to differentiate the Ettrick sand penetrated in 20/1-2 and the Ettrick field reservoir in order to see if the sand in 20/1-2 is locally sourced and possibly disconnected from the White Bear lead. Wells 14/26-1, 13/30-2 and 14/26a-8 were also included in the study in order to calibrate a potential northern source. The study shows that Burns, Buzzard and Ettrick sands have a similar provenance on a regional scale (Moine/Dalradian Basement with recycling of Devonian, Triassic and Middle Jurassic sands) and that heavy mineral data alone were unable to distinguish between them. 2.5 - Semi-regional 3D structural reconstruction study The aims of the study are to better constrain the reservoir distribution using structural modelling and sedimentological techniques to model sediment distribution at key time stages. Midland Valley (2005) carried out a 3D structural reconstruction over the Buzzard-Ettrick graben using 6 regional depth converted surfaces. The decompacted and restored surfaces were used in the tubidite flow modeling using D. Waltham s (Royal Holloway University of London) software. It showed that the most likely source for the Ettrick sands was located west of the Buzzard field. The Buzzard field area was probably September 2006 5 of 14

a by-pass area during the Middle Volgian and the main depocentre is located in the Ettrick graben. 2.6 - Rock Physics Project followed by Seismic Inversion In 2005 a feasibility study was carried out by Odegaard for the Ettrick Field that relied on Vs prediction from the Vp data using Greenberg-Castagna and Xu-white. This study was extended in early 2006 using additional well 20/6-5. The rock physics study has confirmed that it is unlikely that AVO will help to discriminate between fluid types in the Ettrick section. Data quality on the mid to far stacks is unlikely to be good enough because of the overlying chalk section restricting the offsets that can be recorded and introducing significant multiple contamination. The crossplotting work, based on the Vp and Vs data also suggests that the rock physics of the Upper Jurassic does not lend itself to this type of analysis. AVO techniques could not be used to mitigate the increased risks that we now associate with Black Cat/White Bear lead. 3 - Prospectivity Analysis White Bear/Black Cat lower terrace lead is a stratigraphic trap defined by the Middle Volgian Ettrick Sand pinch-out to the west and the north. The southern closure relies on down-thrown fault seal against the Upper (Figures 5 and 6). The Kimmeridge Clay Formation acts as both the source rock and the seal. The KCF is mature for oil generation in the Ettrick Basin some 3 km east of the lead area and is interpreted to have sourced the Ettrick and the Buzzard fields. Despite a thinning of the Ettrick sequence (Figure 5), a stratigraphic separation of the main White Bear lead area from lower Black Cat terrace is not apparent from the reevaluation the 3D data, suggesting that ultimate trap risk for the White Bear lead is not viable and also therefore very high risk. The recently completed rock physics study also suggests that it is unlikely that 3D AVO will help to differentiate between fluid types in the Ettrick reservoir. 4 - Reserves Summary and Chance of Success September 2006 6 of 14

The input data for the probabilistic STOOIP and Reserves calculation for the Ettrick Sandstone are detailed in Table 1. The P90, P50 and P10 Gross Rock Volumes (GRV) are outlined on the Top Ettrick Depth Map on Figure 5. The reservoir parameters are derived from off-set wells, including the Ettrick Field data. Table 1: White Bear/Black Cat Lower Terrace Ettrick Sandstone Reserves White Bear/Black Cat P90 P50 P10 Pmean Lower Terrace Lead GRV (Acres/ft) 108,830 490,200 2,205,515 929,850 N:G (%) 10 20 40 23 Porosity (%) 15 19 25 20 (1-Sw) (%) 75 82 90 82 FVF 1.2 1.34 1.5 1.35 Recovery Factor (%) 20 32 50 34 STOIIP (mmbbls) 16 85 457 194 Reserves (mmbbls) 5 27 158 65 The Geological Chance of Success for the White Bear lead is estimated at 8%. Nexen use a five point risking matrix to determine the leads Geological Chance of Success, as follows: Table 2: Geological Chance of Success for the White Bear/Black Cat Lower Terrace Lead Risk Component Definition White Bear/Black Cat Lower Terrace Lead Risk Source: Presence of sufficient 1 mature source rock Timing and Migration: Timing of trap formation relative to oil migration 1 Reservoir: Presence of effective 0.7 September 2006 7 of 14

reservoir Closure: Confidence in the mapped 0.4 closure/trap Containment: Presence of effective seals 0.3 Geological COS 0.08 September 2006 8 of 14

Figure 1: Location Map Block 20/2c Nexen Operated Blocks Figure 2 : Aker1999 reprocessing Stack and migrated data areas September 2006 9 of 14

Figure 3 : Aker 1999 3D Seismic Reprocessing Results Far better noise attenuation, apparent at BCU BCU Top Buzzard BUJ Aker 1999 Far more resolution & continuity Reprocessed version September 2006 10 of 14

Figure 4: Upper Jurassic Well Correlation Quads 13-14-20 20/06-02 GR 140 GR 40 0 0 AC 200 140 10300 10400 10500 10000 9200 10600 10100 9300 10700 10200 9400 10300 9500 10400 9600 10500 9700 DT 200 140 11200 11300 11400 20/1-5z 11400 11500 11600 11700 11800 11900 12100 11900 12200 12000 12300 12100 12400 12500 12600 12700 12800 12900 13000 13100 13200 20/2-4 Ettrick 20/1-5 8900 12000 12400 20/2-1 20/3-3 20/3-2a20/3-6 20/3-5 20/2-3 8800 11800 12300 20/2-5 20/2-620/2-2 8700 11000 11700 12200 20/3-1 8600 10900 11300 11600 11100 10300 8500 10800 11000 11500 11000 10200 13300 13400 20/1-3 13500 20/3-4 13600 20/1-4 20/7-2 20/6- Buzzard 20/6-3z 20/6-2 20/6-6 20/7-1 20/7a-3 13700 20/7a-4 13800 13900 20/8-1 20/6-1 HS=1250 20/8-2 PETRA 17-08-2004 11:49:21 September 2006 140 8400 10900 11400 10900 10100 DTCL 250 10700 11200 11300 10800 10000 0 10600 11100 11200 10700 9900 GRC 40 10500 10800 11100 10600 9800 20/1-2 0 Late Volgian Ryazanian 10200 9900 9100 20/1-1 GR 40 20/7a-4 8300 9800 9000 Top Heather GR 40 9700 8900 J66B MFS Top Buzzard 140 9600 8800 J73B MFS Top Ettrick DT 200 20/2-4 Middle Volgian BCU DT 200 20/2-06 KimmEarly Volgian 0 20/2-05 11 of 14 40

9000 Figure 5: Top Middle Volgian Ettrick Depth and Gross Isopach Map 20/2-5 No sand Fig.7 10000 20/2-6 Water wet Ettrick sand Stratigraphic pinchout defined by 500ft Ettrick Gross isopach White Bear 11000 Thinning of the Ettrick package Fig.6 P10 case Stratigraphic Pinch-out Closing contour @10500ft Black Cat lower terrace ~ Pmean (White Bear only) Stratigraphic Pinch-out Closing contour @10500ft 20/7a-6 P90 case Structural Closure @10400ft 500 1000 1500 0 2 km Black contours: Top Ettrick depth map, interval 200 Colour filled contours: Ettrick Gross Isopach, interval 100 September 2006 12 of 14

Figure 6: W-E Seismic Section through White Bear Lead tying 20/1-5 and 20/2-4 BCU Top Ettrick Top Buzzard Base Upper Jurassic West 20/1-5 Block 20/1 Block 20/2c Block 20/2a 20/2-4 White Bear Ettrick Sand Pinch-out East TWT, ms September 2006 13 of 14

REFERENCES Partington, M.A., Mitchener, B.C., Milton, N.J. and Fraser, A.J. 1993. Genetic sequence stratigraphy for the North Sea late Jurassic and Early Cretaceous: distribution and prediction of Kimmeridgian-Late Ryazanian reservoirs in the North Sea and adjacent areas. In: Parker, J.R. (ed) Petroleum Geology of Northwest Europe: Proceedings of the 4 th Conference, 347-370. 1993 Petroleum Geology 86 Ltd. Published by the Geological Society, London. Waltham, D. Royal Holloway University of London, 3D Forward modelling of turbidity current and its deposits. http://www.gl.rhul.ac.uk/sedtec/spreadsheets/ Turb3d.xls September 2006 14 of 14