Ann: Update on company acquisition and Italian ap, page-14

re: Ann: Update on company acquisition and It... KN1 is a great disappointment. The JV has not said that but thats the reality.

Most of the Songo Songo gas (at least 4/5) is sold at $2.39 per mcf into the energy grid in Tanzania. only a small portion is sold to commercial users at commercial rates of around $7.91. There is also capacity constraint on the gas processing plant and currently the operator is pumping the gas thru at Songo Songo gas plant at full capacity. This is all from Orca Exploration Mar 2009 qtr report.

So KN1 remains uncommercial. Its pretty obvious that the operator of KN1 has not been able to negotiate thru the maze of official pricing policies and competition that characterises the gas market in Tanzania. The latest idea is a pipeline to Kenya but you can imagine how far away and feasible that will be.I have gathered from BUY information that the operator has not made any headway.

If I was KEY and especially BUY I'd look to establishing reserves and sell the in ground resource, same as FAR did with Beibu discovery.