Sir Abu Nu'Ayr Island Project. The right of first refusal to participate in the development of the Sir Abu Nu'Ayr project represents a possible major opportunity for Sky Petroleum. The project would comprise an exploration program in a concession located in the offshore waters of Sir Abu Nu’Ayr Island. The island of Sir Abu Nu'Ayr, which sits in the centre of the concession area, is part of the Emirate of Sharjah and is located in the middle of the prolific off-shore oil territory.

Salt Dome Hydrocarbon Play. The island of Sir Abu Nu'Ayr measures some 4 kilometers in diameter and has been formed by salt diapirism. Salt deposited of Cambrian age has moved progressively upward puncturing through the younger overlying strata to create a dome structure. Salt dome hydrocarbon plays are common throughout the world in areas such as the Gulf of Mexico and the North Sea. Several of these island types occur within the Arabian Gulf, such as Halul Island in Qatar and Arzanah Island off Abu Dhabi.

Geologically, the main reservoir intervals are most likely to be the prolific Ilam/Mishrif and Thamama reservoirs of the Cretaceous period. These reservoirs comprise shallow marine carbonates having excellent reservoir properties, as evidenced by the many world class and giant oil fields in the immediate region.

Strategic development. Upon the completion of its investment in the initial well development and production initiatives on the Mubarek Field, Sky Petroleum intends pursue the potential opportunity to participate in the development of the Sir Abu Nu'Ayr project. Included will be preparations to begin a comprehensive 2-D seismic survey around the Island. The survey is expected to further demonstrate the project's potential.

Upon completion of the Mubarek Field infill drilling program, the Sir Abu Nu'Ayr project will become a top priority for Sky Petroleum. Strategic development. According to the Ministry of Petroleum and Mineral Resources, the UAE’s cumulative oil output totalled 21.3 billion barrels since production started in 1962. At current prices, the total value of that production was estimated at approximately $315 billion dollars. Despite such a huge extracted quantity, the UAE’s proven crude reserves have been sharply revised up over the past decade from approximately 35 billion barrels to over 97 billion barrels.

Distribution of Proven Reserves 2004 (percentage)