Block 3102 Bemolanga

PSC 3102 is located approximately 170 km from the west coast of Madagascar. The field has had over 400 core holes drilled in the 0 to 200 meter depth in the Amboloando formation prior to Madagascar Oil operations, which have proven a bitumen deposit of 10 degree API oil is present. Madagascar Oil began further investigation in 2006 and Total E&P joined the project in 2008 as a 60% partner and become the operator. An aggressive schedule of drilling in 2009 and 2010 analyzed 160 additional core wells to further quantify the amount of recoverable reserves; and assess the efficiency and economics for ore extraction and recovery

Results indicate that bitumen volumes are at least as large as initial estimates and bitumen quality is in line with prior work at approximately 5.5% by weight in the ore, but is half the concentration found in similar Canadian deposits. Laboratory testing has indicated favorable results for extraction performance of 75% using the typical hot water extraction process, which is considerably higher than Canadian predictions for the ore grade. Based on the testing and resultant economic projections from JV mine analysis, Madagascar Oil and Total E&P agree that the low ore grade makes an economic project scenario unlikely at current prices. The conclusion is that a commitment to a pilot extraction plant, specified as a next step in the Bemolanga PSC is not a prudent investment at this time.

The Total and Madagascar Oil Joint Venture proposed and the government has agreed to grant an extension of the current Bemolanga PSC exploration phase and shift the work program focus from mining to a pursuit of deeper conventional oil and gas plays on the Bemolanga block.The requirement for a mining pilot extraction plant was eliminated and an extension of up to three years was approved for the new work program.

The first phase of the program will be a one year period to conduct an 8600 km airborne Full Tensor Gravity (FTG) gravimetric survey to determine potential basement structures and assess need for seismic acquisition. Following the FTG and seismic, the PSC allows for an additional 2 year extension to drill an exploratory well.

It should be noted that the mining core well testing encountered additional evidence that an additional play exists in the block in the Isalo I sandstones at depths below 300 meters and in areas of the Amboloando sand that are too deep to consider for mining. It appears that extraction utilizing steam flood techniques, similar to Tsimiroro have potential that will require further analysis to quantify. Following the steam flood pilot testing in Tsimiroro, the need for further shallow delineation drilling in Bemolanga will be assessed.