New Nagaland Production Sharing Contract
(CANORO 65% Working Interest)
Unique to the oil and gas industry in India, Block AA-ON/7 boundaries are spread over the two adjoining states of Assam and Nagaland. A Petroleum Exploration License ("PEL") was issued for each state in 2001 and 2006 respectively. The exploration period for the PEL for Assam state ended in March 2008. The company made an application for extension for one year, offering to undertake an additonal work program. During 2008, Canoro drilled the Deragon #2 and Borkathani wells, both of which failed to find commercial hydrocarbons and were plugged and abandoned. The company withdrew its application for extension of the exploration phase, thereby relinquishing Block AA-ON/7.

Unable to proceed with operations on the Nagaland portion of the AA-ON/7 block, the Company on behalf of the partners applied for a new Production Sharing Contract ("PSC") covering 319 square kilometers along the Naga Hills thrust belt. The Indian Unable to proceed with operations on the Nagaland portion of the AA-ON/7 block, the Company on behalf of the partners applied for a new Production Sharing Contract ("PSC") covering 319 square kilometers along the Naga Hills thrust belt. The Indian Ministry of Petroleum and Natural Gas ("MOPNG") has announced that the Cabinet Committee on Economic Affairs has approved the splitting of the PSC for Block AA-ON/7 in two parts, thereby recognizing the seperate exploration period of the Nagaland portion of the original block. The Government of India has advised the Company of Cabinet approval of the new PSC and have directed the Company as Operator to commence discussions with the Directorate General of Hydrocarbons ("DGH") to finalize the terms of the new PSC. The DGH has requested on the consortium's behalf a three (3) year extension so that the time period for exploratory activities will be seven (7) years. The DGH also asked the Ministry for more current and suitable PSC terms, analogous to the NELP VIII bid round.