Relinquishment Report

Licence P2016

Block 205/4c

September 2016

JX Nippon Exploration and Production (U.K.) Limited

Idemitsu Petroleum UK Ltd.

Table of Contents

1. Licence Information ............................................................................................................................ 1

2. Licence Synopsis .................................................................................................................................. 2

3. Work Programme ................................................................................................................................ 3

3.1 Drill or Drop Well .......................................................................................................................... 3

3.2 Inversion and Rockphysics Modelling Study ................................................................................. 3

3.4 Core Study ..................................................................................................................................... 3

3.5 Fault Seal Analysis Study ............................................................................................................... 3

3.6 Bandwidth Extension Processing .................................................................................................. 4

4. Database ............................................................................................................................................. 4

5. Prospectivity........................................................................................................................................ 4

5.1 Source Rock ................................................................................................................................... 5

5.2 Migration ....................................................................................................................................... 5

5.3 Reservoir ....................................................................................................................................... 6

5.4 Trap ............................................................................................................................................... 7

5.5 Seal ................................................................................................................................................ 7

6. Additional Technical Work .................................................................................................................. 8

7. Resource and Risk Summary ............................................................................................................... 8

8. Conclusions ......................................................................................................................................... 8

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1. Licence Information Licence Number: P2016

Licence Round: 27th Round

Licence Type: Traditional seaward production licence

Licence award: 1st January 2013

Block Number: 205/4c

Operator: JX Nippon Exploration and Production (U.K.) Limited (55%)

Partner: Idemitsu Petroleum UK Ltd. (45%)

Block coordinates: 60° 54’00.000’’N 3°18’00.000’’W 60° 54’00.000’’N 3°15’30.000’’W 60° 52’00.000’’N 3°15’30.000’’W 60° 52’00.000’’N 3°12’00.000’’W 60° 50’00.000’’N 3°12’00.000’’W 60° 50’00.000’’N 3°18’00.000’’W 60° 54’00.000’’N 3°18’00.000’’W

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Figure 1 P2016 (Block 205/4c) license location map

2. Licence Synopsis Licence P2016 is located 90 km northwest of the Shetland Islands in water depths of c.a. 675m. The

block is adjacent to the Total operated Tormore field and lies to the SW of JX Nippon’s operated

P1850 and P2024 licences. The P2016 licence was awarded to JX Nippon and Idemitsu on the 1st

January 2013 as a Traditional Licence and expires on 31st December 2016.

The evaluation of the P2016 licence at the time of application identified two Vaila Formation aged

prospects in the T35 sequence. The prospects are stratigraphically trapped and identified on the

basis of seismic amplitude anomalies with moderate-good structural conformance.

The licensees have elected not to drill a well on the licence and not to continue the Licence into the

second term.

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3. Work Programme The licence commitments consist of the following work programme,

Full Bandwidth Pre-stack AVO Inversion of 200 km2 of the 2009 Laggan 3D survey, including

Baysian Lithology and Fluid Prediction utilising the Seismic Inversion Attributes.

1 drill or drop well, to be drilled to a depth of 4000 m, or 50 m below the base of the T35.3

sandstone, whichever is the shallower.

In addition to completing the firm work programme, the licensees carried out the following

studies:

Biostratigraphic and sedimentological studies on offset wells to constrain reservoir

stratigraphy, facies models and predictive reservoir quality models for the T35 sequence in

the vicinity of Block 205/4c.

Rock physics modelling to calibrate seismic attributes from the Laggan 3D seismic data to

well control and derive predictive models for reservoir quality and fluid content.

1D fault seal study of the main prospect and bandwidth extension seismic processing (BE®)

on a subset of the 3D data to de-risk the trap element of the petroleum system.

3.1 Drill or Drop Well

The licensees have elected not to drill a well on the licence acreage and to relinquish the licence.

3.2 Inversion and Rockphysics Modelling Study

The licensees purchased the PGS MegSurveyPlus data which includes the reprocessed 2009 Laggan

3D survey. These data were used for Pre-stack AVO inversion. An area of 225km2 was inverted and

includes the entire licence area and the adjacent Tormore field. The 205/5a-1, 205/9-1 and 205/9-2

wells were used for calibration and rock physics modelling.

3.4 Core Study

A core study on well 205/9-1 focused on understanding the sedimentological and paragenetic

aspects of both the Kettla Tuff Member and Vaila Sandstone. A full core and petrographic

description was undertaken and integrated into the regional depositional model.

3.5 Fault Seal Analysis Study

1D fault seal analysis was carried out using a pseudo log located adjacent to the southern trap

defining fault and was evaluated using Shale Gouge Ratio triangle diagrams.

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3.6 Bandwidth Extension Processing

Bandwidth extension processing was applied to the full stack seismic data, using 225 km2 of PGS

MegaSurveyPlus data.

4. Database The Laggan 3D seismic volume was acquired by Total in 2009. The reprocessed MegaSurveyPlus

data by PGS contains this volume and was used for seismic interpretation, pre-stack AVO inversion

and bandwidth extension processing. The 205/5a-1, 205/9-1 and 205/9-2 wells were used for well

correlation, core study, sequence stratigraphy, biostratigraphy and petrophysics analysis. The

database is shown in Figure 2.

Figure 2 P2016 (Block 205/4c) license location and database map

5. Prospectivity Two T35 aged sandstone prospects were identified in the licence application — Upper Barr and

Lower Barr. The work programme confirmed the validity of both prospects and an additional deeper

prospect (Deep Barr) was identified. The Lower Barr prospect contributed most of the resource in

the licence area. Figure 3 is a full stack amplitude map extracted over the Lower Barr horizon

(T35.4A).

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Figure 3 Full stack amplitude map with depth structure contours seismic amplitude map of the T35.4 A horizon defining the Lower Barr prospect

5.1 Source Rock

The most significant and widespread source rock within the Flett sub-basin is believed to be the

Kimmeridge Clay Formation (KCF), which typically has moderate-high TOC and consists

predominantly of type II/III marine kerogen. HC generation is modelled as beginning in the Late

Cretaceous with main gas generation in the early Tertiary. The presence of oil beneath the gas leg in

the Tormore field requires either “motel” models or an evaporative fractionation process.

5.2 Migration

In the Laggan and Tormore fields, it is the licensees view that significant discontinuities along

intrusive sills beneath the reservoir horizons provide favourable migration paths from source to

reservoir. The proximity of the Barr prospects to the Tormore and Laggan Fields, together with their

location updip of a significant fault linking an underlying igneous sill with the target horizons, de-risk

the charging component of the petroleum system.

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5.3 Reservoir

The 205/9-1 well encountered a thick T35.4 sandstone* consisting of a 370m thick sequence of basin

floor fan sandstones with good reservoir quality. Based on seismic well tie, three distinct sand

packages have been identified — the A, B and C sands (Figure 4). On the basis of seismic

interpretation, there is high confidence in correlating sand packages between the prospects and the

205/9-1 and 205/5a-1 wells (Figure 5).

Figure 4 Petrophysical analysis of well 205/9-1 CPI and CCA – T35.3 and T35.4 section

* The sandstone dominated sequence sitting immediately below the Kettla Tuff Member, corresponding to the upper part

of the Vaila Formation (V4 unit), is defined by JX Nippon as a new T35.4 sequence, whose base is bounded by the T35.3

sequence boundary.

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Figure 5 Seismic section between 205/9-1, the Lower Barr prospect and 205/5a-1 Data: MegaSurveyPlus data courtesy of PGS MultiClient

5.4 Trap

The quality of seismic data is good and depth conversion uncertainty was considered small due to

close well control. All the prospects are stratigraphic traps relying on sand pinchout to the east

(confirmed by the absence of T35.4 sands in the Tormore field). The quality of the seismic data

confirms that the fault defining the southern boundary of the prospects has sufficient throw to allow

separation of the prospects from the water wet 205/9-1 well.

5.5 Seal

The T35 basin floor fan sandstones, which form the primary reservoir objective in the Flett Sub-basin,

are overlain by a regionally extensive highstand system mudstone sequence (T35.4 mudstone or V4

Upper Vaila Fm. mudstone) which forms an effective regional pressure seal separating normally

pressured Lamba Formation from over-pressured Vaila sandstones below.

Base seal is provided by intraformational mudstones within the individual fan sequences.

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6. Additional Technical Work In addition to the petroleum system evaluation, the licensees have undertaken rock physics studies

using inversion attributes, core study, fault seal analysis study and bandwidth extension processing

(BE®).

As a result of these studies, the charge risk has been reduced and there is greater confidence in fault

and trap definition.

7. Resource and Risk Summary Based on the prospect evaluation, resources and risk are summarized as below (Table 1 and 2).

ON LICENCE (P2016) Total Rec. Resource

MMboe

ENTIRE PROSPECT Total Rec. Resource

MMboe

P90 P50 P10 Pmean P90 P50 P10 Pmean

Upper Barr 0.6 2.3 6.2 2.9 0.8 3.5 9.4 4.5

Lower Barr 8 26 73 34 12 42 106 52

Deep Barr 4 11 23 12 4 12 28 15

Table 1 Summary table of prospect reserves evaluated using a gas case scenario

Trap Seal Reservoir Source Migration GPOS Key risk

Upper Barr 0.63 0.56 0.81 1 0.85 0.24 Seal

Lower Barr 0.81 0.56 0.81 1 0.85 0.31 Seal

Deep Barr 0.52 0.56 0.81 1 0.85 0.20 Trap

Table 2 Risking Table

8. Conclusions The work programme has assessed the Upper and Lower Barr prospects identified in the 27th Round

Application and identified a further prospect (Deep Barr), with the bulk of the resource in the lower

Barr prospect.

Both reserves and GPOS have been downgraded compared to the pre-award evaluation. As a result,

with current economic assumptions, the prospects are considered commercially unattractive. The

licensees have therefore decided to relinquish the P2016 licence.

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9. Clearance This report has been approved for publishing by both JX Nippon Exploration and Production (U.K.)

Limited and Idemitsu Petroleum UK Ltd. PGS has also approved the use of their MegaSurveyPlus

dataset in this report.