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Group plans to start undersea drilling in 2014

NUKUALOFA, Tonga (Matangi Tonga, Jan. 31, 2011) – A year after signing hydrocarbons exploration and mining agreements with the Tonga Government, a U.S.-based venture capitalist group announced in Nuku'alofa on January 27 that they aimed to start exploratory drilling for oil in Tonga's seabed in 2014 and they celebrated the occasion with not only a project presentation but also a guest performance by a Las Vegas singer flown to Tonga.

Dr Kairat Sydykov, the Managing Director of Modulus-Baringer Group, confirmed that the group had formed three Tongan registered subsidiary companies that had signed Petroleum Mining Agreements with the Tongan government on January 22 last year.

He said that the agreements represent the first significant hydrocarbons exploration effort undertaken in Tonga since the 1970s-1980s when a number of seismic and drilling projects were completed.

The new companies, Modulus Pacific, Baringer Tonga Central and Baringer Tonga South had signed agreements with an 11 years exploration phase, and a production phase of 35 years in case of commercial discovery.

"The agreements stipulate oil and gas exploration within 37,000 square kilometers of marine scheduled lands of the Kingdom of Tonga. In a case of a commercial discovery, the companies will develop the fields and produce hydrocarbons," Dr Sydykov told a Tonga Petroleum Project Presentation attended by the Princess Regent Her Royal Highness, Princess Pilolevu at the Faonelu'a Convention Centre in Nuku'alofa.

He said that after completion of the survey there is a schedule for surrender of land back to the government, except for the areas where hydrocarbons may be discovered.

The group started exploration work in May 2010 by accessing existing seismic data held by the Pacific Islands Applied Geoscience Commission (SOPAC).

"The data had been collected 30-40 years ago when data analysis was performed manually. But now we have computer software to process the data and we see an improvement by reprocessing the data," he said.

The interpretation would be completed by June 2011 and would help to identify possible hydrocarbon traps which represent targets for new seismic drilling, he said. "Exploratory drilling is expected to start in 2014."

Dr Sydykov is a founder director and equal shareholder in the Modulus-Baringer Group, which has its Head Office in Denver, Colorado, U.S.A. The company was established to explore energy resources.

His keynote speech marking the first anniversary of the Petroleum Mining Agreements was also attended by the Prime Minister Hon. Tu'ivakano and the former Prime Minister Lord Sevele, with Cabinet Ministers, Members of Parliament, foreign diplomats and members of the business community.

The Attorney General, 'Aminiasi Kefu, said that a negotiation team including Lord Ma'afu (now Minister of Lands), Busby Kautoke Chief Secretary to Cabinet, and Kelepi Mafi the government geologist, had spent four days in negotiations with the Modulus-Baringer Group, which resulted in three petroleum agreements with three Tonga registered companies. He said that the former Deputy Prime Minister, Dr Tangi had signed the agreements last January on behalf of the Tonga government, under a 1985 law.

"We have had two meetings since for our work programs and budgets and we have been impressed by the potential of this significant project, said 'Aminisi. Tonga is lucky to have Dr Sydykov leading this project," he said.

It is understood that Tonga will not be putting any money into the exploration which will be achieved by attracting foreign investors.

Dr Sydykov outlined what the three Tongan registered companies had achieved after a year in operation, and their working program for the first four years.

He said they were looking for hydrocarbons traps, which meant petroleum or oil and gas, which were formed and accumulated underground after millions of years under pressure.

"When considering the Tonga preconditions there have been oil seepages on Tongatapu that testifies to the presence of oil in the Tonga sub-surface, he said. There is evidence of hydrocarbon trap presence. Recently we completed a geochemical analysis of oil seepage from samples kept by the Ministry of Lands and the result shows water containing black stuff that represents mature oil, he said. It shows that the Tonga field has potential for a commercial hydrocarbon field."

He said that at this stage all three agreements related to upstream exploration only. He estimated that the upstream phase would require investments of around US$20- 40 million of international capital and expertise.

Later midstream and downstream stages of appraisal, development and production, would require significantly more investment, he said.

He believed that projects with foreign direct investments bring numerous benefits to host countries. He said the main areas that Tonga would benefit from were increases budget revenue; development of Infrastructure; employment opportunities; and discovery push up whereby Tonga may attract more foreign investors.

A Modulus-Baringer press release stated that at a meeting of Exploration Geophysicists in Denver in October, Dr Sydykov had said that no hydrocarbon discoveries had been made in Tonga in the last 40 years because it represents a risky emerging market.

"Achieving success in exploration of its hydrocarbons reserves requires strong joint efforts and commitments of the country leadership and international business community. New business models and practices are to be established to encourage investors to bring resources sufficient for exploration of the huge marine area of Tonga. The agreements give investors high confidence that the country leadership is committed to bringing international capital and expertise to Tonga," he stated.

Dr Sydykov who has more than 34 years of experience in the oil and gas industry was a founder and Board of Directors member of the First International Oil Corporation, one of the largest oil companies operating in Kazakhstan. He obtained his PhD in geophysics from Oil and Gas University of Moscow in 1986 and he was a member of the European Association of Geoscientists and Engineer (EAGE). He was a member of the Board of Directors of EAGE from 2005-2007.

The Chairman of the Modulus-Baringer Group is Dr Alexander Zhukov, a Russian expert in the oil and gas industry.

On January 27 Tonga's Minister of Minister of Land, Climate Change and Mineral Resources Lord Ma'afu said he was pleased that the mining group were "environment sensitive" and "we look forward to meeting our mutual commitments."

The Tonga Petroleum Project Presentation was concluded with a reception and the guests were entertained by Natalia Lapina, a Las Vegas "singer, songwriter and actress" who was flown over especially from the U. S. to sing for the occasion.

Also present was Ann Volkh, a flamboyant Hollywood publisher and media personality. Ann, a Soviet Russian émigré whose family owns the Vesoft Inc a computer-software company in California, is the Corporate Affairs Manager of Modulus-Baringer Group.

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