RELINQUISHMENT REPORT

SEAWARD PRODUCTION LICENCE P1547 Block 110/3b

Centrica North Sea Gas Ltd

(Operator - 70% owner)

Trap Oil Ltd

(30% owner)

1. Introduction and Synopsis Licence P1547 comprising Block 110/3b in the East Irish Sea (Figure 1) was awarded on 1st April

2007, as part of the 24th UKCS Licencing Round, to Reach Exploration (North Sea) Ltd. for an Initial

Term of four years. In 2008, Venture Production farmed-in to 70% of the Licence, and in 2009 the

110/3b-6a ‘Whitbeck’ discovery well was drilled. In 2011 Venture Production was acquired by

Centrica Energy, and in 2011 Reach Exploration was acquired by Trap Oil Ltd. The Licence was

renewed for a further four years in 2011, at which time 50% of the Licence area was relinquished,

and expires on 31st March 2015. A further 57% of the Licence area was relinquished in 2013, with

only the immediate field area being retained (34.5 km2). Current owners are Centrica North Sea Gas

Ltd (Operator, 70%) and Trap Oil Ltd (30%). The owners are in full agreement that the Licence be

relinquished, effective 6th December 2013. The discovery well, 110/3b-6a, remains suspended. The

Operator retains sole responsibility for it final abandonment.

Work Programme Summary

'Promote' Licence requirement

With reference to the obligations imposed by this Licence, the Licensee shall demonstrate to the satisfaction of the Minister -

(1) the financial capacity of the Licensee; and (2) the competence of the following persons to organise and supervise any of the operations of

searching for, boring for and getting Petroleum - a. the Licensee, where the Licensee is one person; or b. any operator or operators exercising functions in accordance with model clause 20,

where the Licensee is two or more persons.

Firm commitments

The Licensee shall obtain:

300km of 2D seismic data; and

200km2 of 3D seismic data.

Drill-or-drop commitment

The Licensee shall either:

drill one well 100m into the Carboniferous (c. 1500m), or

elect to allow the licence to automatically cease and determine pursuant to Clause 3.

Work Completed for Initial Term Commitments (Figure 2)

1) Obtained 380 km of TW85MB 2D survey 2) Purchased additional 2D surveys R94, R97 not listed in DEAL 3) Reprocessed more than 200 km2 of merged 3D EIS 3D PreSTM seismic survey 4) Acquired BN08 3D seismic survey and merged with 3DEIS survey. Approximately 65 km2 of

3DEIS overlaps into P.1547 5) Drilled 110/3b-6a in 2009, which reached TD at 1,764m MDBRT (5,787 ft MDBRT).

2. Exploration and Development Activities, and Prospectivity Whitbeck was discovered with well 110/3b-6a drilled in 2009 to a TD of 5,787 ft MDBRT. Top

reservoir was some 500 ft deep to prognosis in the well, in part due to a miss-pick of the top

reservoir seismic reflector and partly due to the presence of shallow volcanics which hadn’t been

identified pre-drill, resulting in much faster seismic velocities unaccounted for in the depth

conversion. Both of these issues may be mitigated by further work and possible re-processing of the

seismic data. However, this work would not resolve the issues of reservoir connectivity and

structural configuration, and fluid contacts.

A net reservoir interval of 76.5 ft. TVD was encountered in the Ormskirk sandstone at a depth of

5,282 ft. TVDSS, with 55 ft. TVD of net gas pay. Average porosity in the gas leg is 10.4% with a Sw of

44.2% (Figure 3).

Whitbeck is a complexly faulted, 3-way, dip-closed trap. The discovery well passes through the

reservoir section from hanging wall to foot wall. The structure appears to be dip-closed, bisected by

the N-S striking fault encountered in the well (Figures 4 & 5). The overlying seal is a mix of

conformable, impermeable mudstones and halites of the Mercia Mudstones on the Ormskirk

Sandstone. Whitbeck appears to be a combination trap, with the discovery well encountering a

fault, having reservoir at virgin pressure in the hanging wall and partially depleted reservoir (by ca.

500 psi at the time of drilling in 2009 – Figure 6) in the footwall, implying a sealing fault. An

alternative interpretation is that the Centurion Mudstone is acting as a barrier to communication

between the upper and lower reservoirs (i.e. no fault in the well), and only the lower reservoir is in

communication with one of the producing fields nearby (possibly via the aquifer) and is therefore

depleted. The nature of this trap can’t be fully resolved with the available data and is open to a

number of different interpretations (see Figures 7 to 13).

The reservoir comprises Ormskirk Sandstone Formation which is the upper part of the Sherwood

Sandstone Group. These sands were deposited in both a braided river environment and in an

aeolian/sandflat/sabkha environment. The Ormskirk Sandstone Formation is made up of pale brown

to light grey sandstones with occasional interbedded red and brown claystones and siltstones. The

sandstones are very fine to medium grained, occasionally coarse, moderately hard to friable, and are

cemented by quartz and/or carbonates.

Due to the presence of the near-surface volcanics above the Whitbeck discovery, the quality of the

seismic data has been in question. Consequently, a recent re-evaluation of the seismic data quality

covering the Licence area has been completed, the conclusions of which are:

• a recommendation to acquire new 3D seismic for optimal results

• with 2D acquisition, potential improvements may be attained by

– Better source design to improve the low frequency content

– Decreased minimum offsets to record water bottom and consequently improve

demultiple and velocity determination

– Increased maximum offset (to 2600m)

• A revised reprocessing strategy of the legacy data would only result in moderate to slight

improvements in quality

There is however, a major impediment to acquiring seismic data over the field in the form of the

West of Duddon Sands wind farm, operated by Dong Energy. This overlies much of the discovery,

precluding acquisition of 3D seismic (a multi-streamer array could not be safely towed through the

wind farm) or even 2D seismic with a recommended streamer length of 2600m (recent acquisition

through the Ormonde wind farm used a 600m streamer, which was considered to be close to the

safe maximum). The only remaining option for seismic acquisition is therefore Ocean Bottom Cable

(OBC) which, even in an upside case would be hard to justify.

Development Project Studies Whitbeck has been the subject of a number of studies to determine commerciality, both in isolation

and in combination with other discoveries.

Marram and Whitbeck (In-house Study)

In 2010, Centrica completed an in-house study looking at options to integrate the Marram and

Whitbeck fields into the EIS infra-structure. The focus of the report was on evaluating alternative

methods for dealing with the high inert gas content of the Marram and Whitbeck fields.

The study completed a high level screening of offshore development concepts for Marram and

Whitbeck considering both standalone & combined Marram and Whitbeck developments via Bains,

Rhyl or the DPPA platform. The study also completed a brief technical feasibility study and economic

evaluation of the following options for export of the Marram and Whitbeck gas:

• Export of off-specification (high nitrogen content) gas to regional power stations for use as

fuel gas

• Tie-back to the South Morecambe platform and transportation to Barrow for processing of

gas at the Barrow Terminals for export into the National Transmission System (NTS) using:

– The existing facilities at the Barrow Terminals (i.e. operating within the capacity

constraints of the existing facilities)

– New Nitrogen rejection facilities (NRU) constructed at the Barrow Terminals (i.e.

eliminating the capacity constraints within the existing facilities)

The study concluded that:

The power station option was not feasible owing to the additional development costs

(offshore and onshore pipeline infrastructure) and because the turbines would be unable to

process the gas without further processing to reduce the inert gas content;

Marram and Whitbeck do not justify, in their own right, the expense of building any

additional nitrogen rejection capacity;

There are benefits in reusing the Bains facility, namely reduced capital expenditure and

deferred abandonment costs, but insufficient to support the mapped resource.

The study went on to recommend that only if substantial gas reserves are discovered in the region

would construction of a new NRU be justified.

It is noted that the cost estimates for a new Nitrogen Rejection Unit quoted in this study appear low

compared to the original cost of the N Morecambe Terminal cost in 1995, around one third of which

was spent on the NRUs and associated equipment.

Marram and Whitbeck Screening Study

A study for the development of the Marram and Whitbeck fields was completed by Genesis in 2012.

The study considered development of Marram and Whitbeck together; Marram only, and Whitbeck

only. It was assumed for all three options that the fields would be developed via the existing Bains

Field subsea infrastructure through modification to the tie-in spool linking the Bains well to the Bains

flexible flowline. Two scenarios were considered for use of the Marram/Whitbeck gas, the first being

transportation to the Barrow terminals for processing and export and the second being to use a

proportion of the production from Marram / Whitbeck to provide fuel gas to the South Morecambe

Central Processing Platform.

The study concluded that minimal topsides modifications would be required by the first scenario

(subsea controls only). However, for the second scenario, a new Marram / Whitbeck reception

vessel, filter coalescer and LP fuel gas compressor would be required in order to maximise the

amount of Marram / Whitbeck gas used as fuel gas.

The study did not make a recommendation as to which option should be progressed and failed to

reach a conclusion on the feasibility of using the high nitrogen content gas as fuel gas. The study

indicated that:

The cost differential between the two options was significant (+/-40%), with the fuel gas

option being more expensive owing to the extensive topsides modifications;

There are some significant risks associated with the fuel gas option, the principal one being

that if the gas turbines on the South Morecambe CPP are modified to burn high nitrogen

content gas, it may not be possible to switch back to gas with a lower nitrogen content,

leading to total field shutdown in the event of an interruption to production from

Marram/Whitbeck

The study also looked at the feasibility of installing subsea wells and flowlines in the shallow water

depths at the Marram/Whitbeck locations, but did not reach any definitive conclusions.

Knox, Lowry, Marram and Whitbeck Screening Study

The purpose of the 2012/13 Xodus screening was to consider all feasible options and identify those

preferred options to be retained for consideration during the Select phase. The study attempted to

complete an unconstrained evaluation of 78 development options (involving different combinations

of fields, and tie-in locations) which were split in to five groups:

Knox and Lowry options

Marram and Whitbeck options.

Combined Knox, Lowry, Marram and Whitbeck options.

Lowry and Marram options

Lowry, Knox and Marram options

3. Resources Whitbeck has been the subject of a number of attempts to establish its commerciality, most recently

as part of the EIS Integrated Satellite Fields Study (Knox, Lowry and Marram being the other fields in

the study). As with previous studies however, it is clear that Whitbeck cannot be developed

economically, either as a stand-alone project or in combination with one or more of the other small

satellites with which, in all cases, it has been determined to be value destructive.

The primary control on this outcome is the size of the resource, determined by the complexity in

subsurface definition:

Whitbeck GIIP and Resources

Total GIIP (bcf) 9.0

Recoverable sales gas (bcf) 6.0

As part of the ‘Evaluate’ Phase, Development Options were screened and economics calculated for

the lowest cost cases:

Description Notes

Whitbeck tie back via Bains S/T subsea well 110/3b-6a

Marram-Whitbeck via Bains 1 subsea well & NUI with 2 wells for Marram

KL/MW as Parallel Developments 3 subsea wells & NUI with 2 wells for Marram

4. Conclusions Whitbeck cannot be developed economically for the foreseeable future, given gas price forecasts

and estimated development costs. In addition, high N2 content (ca.13%) further complicates the

development options. The calculated GIIP and sales gas are insufficient to support the costs of

development, either as a standalone development or in combination with other discoveries in the

area. Current subsurface interpretation concludes there is insufficient upside potential to warrant

further data acquisition (i.e. seismic acquisition). In addition, such acquisition has now become

logistically difficult due to the development of the West of Duddon Sands wind farm covering much

of the remaining prospectivity.

5. Maps & Figures

Figure 1

Figure 2

Figure 3

110/3b-6A CPI

E 110/3b-6A

W

66

RP TW85 - 66

Figure 4

Figure 5

Figure 6

Figure 7 Figure 8

Figure 9 Figure 10

Figure 12 Figure 11

Figure 13

6. Clearance Centrica North Sea Gas Ltd. and its’ co-licensee Trap Oil Ltd confirm that DECC is free and clear to

publish this relinquishment report.