Genel Energy and Sterling Energy Operations in Somaliland

The break-away territory of Somaliland sees test drilling for oil as possible by 2015 as many companies start exploring activities :

• Two PSAs covering five blocks: SL-6, SL-7, SL-10A, SL-10B, SL-13
• Genel 75% interest and operator in blocks SL-10B, SL-13 (East Africa Resource Group 25%)
• Genel 50% interest and operator in blocks SL-6, SL-7 and SL-10A (Sterling Energy 40%, Petro soma 10%)
• Total gross acreage 40,300 square km

  In August 2012, Genel was awarded an exploration licence for onshore blocks SL-10-B and SL-13 in Somaliland, with a 75% working interest in both. Genel extended its presence in November 2012 with the acquisition of 50% participating interest in the Odewayne Production Sharing Agreement which covers blocks SL-6, SL-7, SL-10A.

  Onshore Somaliland is a relatively unexplored region, with few exploration wells drilled. The total size of the blocks is approximately equivalent to the entire Kurdistan Region of Iraq.

  Genel took the opportunity because of encouraging indications including onshore oil seeps and existing geological data showing favorable conditions for hydrocarbons to have accumulated in numerous large tilted fault blocks and sub-basins. In addition, the basins of Somaliland were contiguous to Yemen prior to the opening of the Gulf of Aden in the Oligocene-Miocene – similar sedimentary sequences and structural styles are expected in Somaliland.

  We are targeting resources of over 1,000 mmbbls in blocks SL-10B and SL-13. The Odewayne block has a similar resource potential to this, targeting in order of 1,000 mmbbls.

  Gravity and aeromag has been acquired and interpreted over the entire 40,000 square km acreage.

  Seismic operations in Somaliland have been temporarily suspended due to deterioration in the security environment. Discussions continue with the Somaliland Government in order to facilitate a resumption of activity.

  STERLING ENERGY OPERATION IN SOMALILND

In Somaliland, Sterling’s interest in the large onshore block is carried by Genel Energy Somaliland Limited (“Genel”) for the costs of all exploration activities during the Third and Fourth Periods of the Odewayne Production Sharing Contract (“PSC”). The Third Period expires in November 2016, with an outstanding minimum work obligation of 500 km of 2D seismic, while the Fourth Period expires in May 2018, with a minimum work obligation of 1,000 km of 2D seismic and one exploration well. Operations in Somaliland have been delayed while the Government of the Republic of Somaliland establishes a trained and equipped Oilfield Protection Unit (“OPU”) that can provide the level of security required by the in-country operators so that future seismic and drilling operations can be conducted safely. The Third Period of the PSC was recently extended by two years in order to allow time for the OPU to be established. The OPU is expected to be operational in 2015.