Subject to AusAm securing the necessary financial support by 30 November 2002, the farm-in agreement will see AusAm commit up to $10 million on exploration within the areas covered by Lakes Oil's exploration permits in return for a 50% interest in the permits.
Lakes said AusAm will be the operator, drawing on its experienced personnel in the USA, who have produced commercial gas from similar reservoirs in that country.
The obligations by AusAm comprise a minimum expenditure commitment of $5 million, or alternatively drill and complete two wells to fully evaluate and test the potential for gas production in the Strzelecki Formation.
However, in order for AusAm to earn its 50% interest, it is required to expend $10 million on exploration, or having made a discovery to commit to spending $10 million, Lakes said.
AusAm is an unlisted public company formed in 1999 to acquire and exploit known "tight" gas resources strategically located onshore Australia. The company's objective is to exploit these owned or majority controlled resources by importing and applying proven under-balanced drilling (UBD) and advanced completion and stimulation methods developed in USA and Canada.
These methods were previously confined to onshore North America, where AusAm has estimated that a significant amount of the current gas supply in the United States is from similar "tight" or low permeability gas producing reserves.
Lakes said after fifteen years of development and subsequent standardisation in the USA and Canada, the technology and techniques are now being implemented in the North Sea and the Asia Pacific by both mid-sized independents and major multi-national oil and gas companies in order to exploit similar tight gas reserves.
As for AusAm itself, the company said its objective is to be the primary developer of several large Australian onshore gas reserves utilising the same technology and methodology that generated significant value in the mid-Continent tight gas basins of the United States.
AusAm said it believes there is an opportunity for an additional supplier in the state of Victoria which has excellent infrastructure and a developing market, and will relocate its office to Melbourne to base its operations in that state.
