Primeline Energy Holdings Inc. - Lishui Gas Play

The Lishui 36-1 discovery has shown that a hydrocarbon system exists in the Lishui Basin, much of which is within Block 25/34. Near to the gas discovery there are several prospects and leads which have been identified in the 3D seismic data and which have similar geological and geophysical characteristics to Lishui 36-1. These analogous prospects, referred to as the Lishui Gas Play, are the focus of Primeline's current exploration programme.

Primeline has so far obtained and interpreted a total of 737 sq km of 3D seismic data over the area of the Lishui Gas play and has confirmed the existence of channel and canyon systems which are believed to influence the distribution of sand in the Basin and in the Lishui 36-1 gas discovery. Primeline has used the latest seismic analysis techniques for lithology and hydrocarbon prediction to characterise the Lishui 36-1 gas discovery and has extrapolated these characteristics into the 3D volume as a predictive tool for identifying prospects in the canyon systems. In this way Primeline has identified six prospects and has ranked them for drilling priority based on their various seismic characteristics.

McDaniel's estimate of Prospective Resources is based on the best estimate of the Undiscovered Original Resources (or Gas Initially In Place -- GIIP) for each of the six prospects and ranges between 14 and 971 Bcf, and the sum of the Property Gross Unrisked Mean Prospective Resources (recoverable pure hydrocarbon gas) is 792 Bcf gas and 21.8 MMbbls Condensate. "Prospective Resources" are defined as quantities of oil and gas which are estimated on a given date to be potentially recoverable from undiscovered accumulations and calculated on a probabilistic basis. McDaniel estimates that the geological chances of success for each of the six prospects ranges from 26% to 46%, McDaniel thus arrived at a Property Gross Risked Mean Prospective Resources for the six prospects close to Lishui 36-1 discovery (within 15 kms) of 279 Bcf of gas (103 Bcf Primeline gross share) and 7.7 MMbbls of condensate (2.8 MMbbls Primeline gross share).

Primeline has agreed with CNOOC on the two best locations for the next exploration drilling in the Block 25/34, being LS35-3 and LS30-3, shown on the map below, and has completed the well design. The two proposed well locations have been surveyed and the Company is now ready to drill once a rig is available. Primeline's 2009 plans are to drill at least one of the two prospects and is currently in negotiations with a drilling contractor to secure a rig for the drilling programme.



	Introduction Exploration History Lishui 36-1 Discovery Lishui Gas Play Block 25/34 Petroleum Contract Dynamic Gas Market Gas Agreement Resource Report	The Lishui 36-1 discovery has shown that a hydrocarbon system exists in the Lishui Basin, much of which is within Block 25/34. Near to the gas discovery there are several prospects and leads which have been identified in the 3D seismic data and which have similar geological and geophysical characteristics to Lishui 36-1. These analogous prospects, referred to as the Lishui Gas Play, are the focus of Primeline's current exploration programme. Primeline has so far obtained and interpreted a total of 737 sq km of 3D seismic data over the area of the Lishui Gas play and has confirmed the existence of channel and canyon systems which are believed to influence the distribution of sand in the Basin and in the Lishui 36-1 gas discovery. Primeline has used the latest seismic analysis techniques for lithology and hydrocarbon prediction to characterise the Lishui 36-1 gas discovery and has extrapolated these characteristics into the 3D volume as a predictive tool for identifying prospects in the canyon systems. In this way Primeline has identified six prospects and has ranked them for drilling priority based on their various seismic characteristics. McDaniel's estimate of Prospective Resources is based on the best estimate of the Undiscovered Original Resources (or Gas Initially In Place -- GIIP) for each of the six prospects and ranges between 14 and 971 Bcf, and the sum of the Property Gross Unrisked Mean Prospective Resources (recoverable pure hydrocarbon gas) is 792 Bcf gas and 21.8 MMbbls Condensate. "Prospective Resources" are defined as quantities of oil and gas which are estimated on a given date to be potentially recoverable from undiscovered accumulations and calculated on a probabilistic basis. McDaniel estimates that the geological chances of success for each of the six prospects ranges from 26% to 46%, McDaniel thus arrived at a Property Gross Risked Mean Prospective Resources for the six prospects close to Lishui 36-1 discovery (within 15 kms) of 279 Bcf of gas (103 Bcf Primeline gross share) and 7.7 MMbbls of condensate (2.8 MMbbls Primeline gross share). Primeline has agreed with CNOOC on the two best locations for the next exploration drilling in the Block 25/34, being LS35-3 and LS30-3, shown on the map below, and has completed the well design. The two proposed well locations have been surveyed and the Company is now ready to drill once a rig is available. Primeline's 2009 plans are to drill at least one of the two prospects and is currently in negotiations with a drilling contractor to secure a rig for the drilling programme.