Lion Energy reports Indonesian oil production

The following is an excerpt taken from Australian firm Lion Energy Limited?s quarterly report ended 31 March 2010 released on Wednesday.

LION ENERGY LIMITED, through its wholly owned subsidiary Lion International Investment Limited, holds a 2.5% shareholding in the Seram (Non Bula) Block Renewal Production Sharing Contract. The major shareholder and Operator of the Joint Venture is CITIC Seram Energy Limited (51 %), KUFPEC (Indonesia) Limited with 30% and Gulf Petroleum Investment (16.5%).

The block contains the Oseil oilfield which had initial field star-up in January 2003 and the Neif Utara A oilfield which wasw started-up in August 2008, and has since produced cumulative crude oil production of 8,816,983 barrels as at 31 March 2010 and 4.428 BCF of natural gas. Most of the natural gas is utilized to generate electricity on site for the operations.

PRODUCTION
During the quarter crude oil production from the Seram (Non-Bula) Block PSC was 196,297 barrels of crude oil at a daily average of 2,181 BOPD over the quarter.

No HSFO or Naphtha was produced during the Quarter, as the decision to permit the Joint Venture a trial sale of crude oil meant that the processing facilities were not required (to process crude oil) and it is used only for H2S stripping for Crude Oil since the end of August 2009.

TRIAL SALE OF CRUDE OIL
In the past, the Seram (Non Bula) Block Joint Venture has been compelled to sell a refined product of its crude oil outside Indonesia because no Indonesian refineries can process the Bula crude oil due to its high sulphur content.

In an attempt by the Operator to reduce costs of the operation, CITIC on behalf of the Joint Venture, applied to the Indonesian regulatory authority (BPMIGAS) to sell crude oil directly overseas. The Indonesian regulatory authority approved a trial sale which completed on 24 December 2009 with the lifting of 249,887 barrels.

This has the potential to significantly reduce forward operating costs for the Joint Venture in the event that further sales are permitted following the trial.

The Operator is negotiating with the Indonesian regulatory authority (BPMIGAS) to secure approval for ongoing sales of crude oil.

At 31 March 2010, crude oil inventory available for lifting was 196,826 barrels. A lifting cargo is scheduled at the end of May 2010 for approximately 340,000 barrels of crude oil. (end of excerpt)