Gobi Energy Partners GmbH ("Gobi"), a subsidiary of Manas Petroleum Corporation ("Manas") holds 100% working interests in Blocks XIII (Tsagaan Els) and XIV (Zuunbayan) onshore Mongolia (hereinafter referred to as "Gobi Blocks") covering approximately 3 million acres (12 thousand sq. km). 26% of Gobi's working Interest is held in trust for a Mongolian company (10%), a US investor group (8%) and a Swiss investor group (8%).

• Gobi is targeting significant oil resources in an area which includes 2 Sinopec operated producing oilfields (Zuunbayan and Tsagaan-Els) with 2P reserves of 180 mn bbls entirely surrounded by the Gobi blocks (See map above). The range of pool or field sizes and structures ranges from 363 to 1041 hectares. 
• The initial evaluation has delineated two plays with associated prospects and leads. Identifiable leads and prospects to be generated upon completion of interpretation of 2D seismic acquired in 2011.
• Production Sharing Contracts for both Gobi Blocks valid until 20 April 2014.
• Excellent access to Chinese markets, and ability to export 100% of crude oil production at international oil prices.

• Mongolia is located in Asia, south of Russia and north and west of China. At 1,564,116 sq. km (603,909 sq. mi), Mongolia is the 19th largest and the most sparsely populated independent country in the world, with a population of around 3 million people. It is also the world's second-largest landlocked country after Kazakhstan. The country contains very little arable land, as much of its area is covered by steppes, with mountains to the north and west and the Gobi Desert to the south.
• Approximately 30% of the population is nomadic or semi-nomadic. The predominant religion in Mongolia is Tibetan Buddhism, and the majority of the state's citizens are of the Mongol ethnicity, though Kazakhs, Tuvans, and other minorities also live in the country, especially in the west. 
• The capital of Mongolia is Ulaanbaatar founded in 1639, a city of approximately 1,200,000 persons, located in the north central part of the country. Ulaanbaatar is located 440 kilometers (270 miles) to the northwest of Gobi’s blocks XIII and XIV.
• Mongolia gained fame in the 13th century when under Chinggis Khaan they established a huge Eurasian empire through conquest. Later, Mongolia was part of Chinese kingdoms. In 1921, Mongolia won its independence from China with Soviet backing and a Communist regime was installed in 1924. In 1990, Mongolia and the Soviet Union announced that all Soviet troops would be withdrawn from Mongolia by 1992. In the same year the constitution was amended to provide for a multi-party system. 
• Mongolia is a member of various international organizations such as the World Trade Organization (1997), the United Nations (1961), ASEAN Regional Forum (1998), Organization for Security and Co-operation in Europe (partner /2004).
• The IMF forecast an economic boom from 2012-2017 spurred by the activity in the mining sector. Real GDP growth is expected to average 12% a year.
• Mongolia is a net importer of oil with production of approximately 6,000 bbl/d against a current demand of approximately16,000 bbl/d.
• According to the IMF the value of oil imports is expected to grow from 0.11 billion $ in 2000 to 1.48 billion $ by 2016; a CAGR of  651%.
• Foreign Direct Investment (FDI) in 2000 was $54 million versus 2010 of $1.5 billion; a compounded annual growth rate (CAGR) of 473%.

• Responsibility for energy matters in Mongolia lies with the Ministry of Energy and Resources of Mongolia. Within this Ministry the implementing agency for petroleum activities lies with the Petroleum Authority of Mongolia (PAM). 
• Petroleum rights are obtained through a Production Sharing Contract (PSC) with the Mongolian government pursuant to the Petroleum Law of 1991. 
• Each PSC grants the contractor the exclusive license to explore for and produce hydrocarbons.
• Under the PSCs, the Contractor is committed to 3 phases of Exploration – first phase of 1 year, second phase of 2 years and a third phase of 2 years – and option to extend the exploration period for 2 extension periods of 2 years each. Extension period of 6 months is also allowed for appraisal in respect of each discovery.
• The original area under the PSCs may be reduced by the Contractor by 25% after the first phase, and between 20% and 30% of the remaining portion of the original contract area after the second phase. However, Contractor shall relinquish all remaining portions of the contract area except the appraisal and development areas prior to the termination of the third phase.
• Commercially producing fields are granted a 20 year production period with a possible extension by two successive 5 year terms.
• Crude Oil and natural gas can be fully exported and sold to any party.
• Fiscal Terms Under The PSCs 
  • The contractor can recover 100% of its costs from 40% of contract crude oil.
  • Government allocation of Profit Oil dependent on bbl/month production.
  • Production bonus payments dependent on daily production rate milestones.
  • Fiscal Terms include royalty as well. 

• Successful Mongolian oil and gas discoveries date back to 1947. However petroleum operations ceased in 1969, due to several factors such as well pressure decline, a fire that destroyed the refinery and discoveries of giant oil fields in western Siberia.
• During 1990-1993, a number of exploration studies were carried out by British Petroleum and Philips Petroleum. The studies included reprocessing and integration of reports and the acquisition of 2D seismic surveys. 
• In 1994-1997, Nescor Energy (USA) conducted exploration and appraisal operations in areas of Blocks XIII & XIV which contained 2 oilfields. In 1998, a Joint Venture of Gulf Canada and ROC Oil (Australia) (“JV”) acquired all rights and assets under these two PSCs from Nescor Energy.
• During 1998-2000, the JV drilled 5 exploration and appraisal wells, acquired and interpreted a total of 2,745 kilometers of 2D seismic, investing in excess of US$5 mn.
• In January 1999, Gulf Canada withdrew from the JV due to the oil price downturn. Later in June 2001, Rock Oil farmed out its interests of the PSCs to Dongsheng, a subsidiary of SINOPEC. Production from these two oil fields continues today and the remaining 2P Reserves are 180 mn bbls.
• Today, Mongolia’s sedimentary basins are divided into 28 exploration blocks with a total area of more than 560,000 square kilometers. 
• 4 Western petroleum exploration companies, including Gobi, are operating in Mongolia. In addition, majors from China (Petro China and Sinopec) have producing assets in Mongolia.

• On April 21, 2009, DWM Petroleum AG (“DWM”), a Swiss company wholly owned by Manas, was granted PSCs for Blocks XIII Tsagaan Els and XIV Zuunbayan.
• On May 11, 2011, DWM transferred rights under both PSCs to Gobi, then its newly established Swiss subsidiary.
• Original area of two blocks (Block XIII and Block XIV) was approximately 5 million acres (20,000 sq km). After relinquishments to be effective on April 21, 2012, these blocks will cover approximately 3 million acres (12 thousand square kilometers). 
• Gobi has obtained all historical data, which includes data from 43 wells and 952 km 2D. Gobi has also integrated numerous gravity surveys and acquired new seismic lines to cover gaps, including 300 km 2D in 2010 and 1,311 km 2D in 2011.
• Gobi has completed its work obligations for Phases 1 and 2. For Phase 3 (April 21, 2012 – April 20, 2014), Gobi is required to drill 1well in each Gobi Block by April 20, 2013 and 2 wells in each Gobi Block by April 20, 2014. Gobi plans to drill first well in 2Q 2012 and second well immediately thereafter.

The Gobi Blocks are located within the East Gobi basin which is considered as part of a series of extensional / transtensional Mesozoic basins located between the Mongol-Okhotsk suture and Yinshan-Yanshan belt. Stretching in East Gobi Basin was assumed to last from Late Jurassic to Mid-Cretaceous times when an inversion is thought to trigger the formation of a regional angular unconformity. Subsequently, (at least) strike-slip faulting continued along some lineaments during Late Cretaceous or possible Tertiary, although sediments of latter age are very scarcely developed (Johnson, 2004; Webb & Johnson, 2006).

The tectonic setting is represented by Early Cretaceous grabens and half-grabens controlled by important sinistral wrenching superimposed on a previous (Jurassic) fold-and-thrust belt. The source rock assumed to date is an Early Cretaceous syn-rift formation made-up of shales to limestone.

The primary prospective section is in the Valaginian lower cretaceous rocks of the East Gobi Basin. These rocks were formed in fluvial and lacustrine depositional environments. The Valaginian age Tsagaan Tsav formation is the main sandstone reservoir rock in the Tsagaan Els and Zuunbayan oil fields, which are located between Blocks XIII and XIV. Depth to top of Tsagaan Tsav is less than 750 meters (2,461 feet) in the Zuunbayan field area, and the Tsagaan Tsav unit is approximately 600 meters (1,970 feet) thick in the East Gobi Basin.

The Hauterivian to Albian age Zuunbayan formation is approximately 970 meters (3,200 feet) thick and consists of sandstone with interbedded shales and occasional interbedded tuffs representing near shore lacustrine and fluvial depositional environments. The lower part of the overlying Zuunbayan formation contains additional possible sandstone reservoir rocks with the upper part forming a seal overlying Cenomanian age Sainshand or Baruunbayan formation for a regional seal.

General stratigraphic column

Outcrop of the Tsagaan Tsav sandstones

Commercial production occurred from 1953 until 1969 in the Zuunbayan and Tsagaan-Els oil fields and resumed in 2007 by Sinopec. These fields are located in Block 97, entirely surrounded by the 2 Gobi blocks. Each of the producing fields is approximately 20 kilometers from the boundary of the blocks. The range of pool or field sizes and structures ranges from 363 to 1041 hectares.

The initial evaluation has delineated two plays with associated prospects and leads. Identifiable leads and prospects to be generated upon completion of interpretation of 2D seismic acquired in 2011.

The main pay section is expected between 800meters (2620 feet) and 2,200 meters (7200 feet) below the surface.

The Tsagaan Els field was discovered in 1953 with development continuing until 1963. This field was evaluated but not produced at the time. There are multiple stacked pay horizons averaging 5 meters (16 feet) thick within both the Tsagaan Tsav Formation and lower Zuunbayan Formation. Field data include porosity of 13 to 18 percent, permeability of 0.1 to 16 millidarcies, high paraffin content, and sulfur content of less than 0.25 percent.

The Zuunbayan oil field was discovered in 1941. A refinery was built in 1950 when production started. Produced oils from the Zuunbayan field are waxy and average 28° API with an API gravity range of 23° to 38° reported. The Zuunbayan field is located 750 meters (2,460 feet) above sea level near the community of Zuunbayan. The depth to the main reservoir is 475 meters (1,558 feet) below surface. Other field data includes sulphur content of 0.11 percent to 0.23 percent, gas oil ratio of 3 to 150 cubic ft/bbl, permeability of 2 to 1,000 millidarcies, porosity of 12 to 16 percent, hydrocarbon saturation from 22 to 50 percent, areal closure from 6 to 8 square kilometers, and a recovery factor to date of 9 percent. Pay thickness averages 6 meters (20 feet) and there are multiple stacked pay horizons in both the Tsagaan Tsav Formation and the lower Zuunbayan Formation.

Zuunbayan Oil Field Pay Map, Cross Sections, and Stratigraphic Column

Since August 2008, Gobi completed a field work program defining structural trends with potential petroleum accumulations. During 2009-2010, Gobi has conducted a gravity analysis of the existing gravity data and has acquired additional gravity data to fill in gaps in the data on the east and west end of the block complex.

Additional 4,000 km of gravity data over the Gobi Blocks were acquired. The result of interpretation of all gravity surveys is shown in the gravity map below.

In early 2011, Gobi contracted Danubian Energy Consulting, a Romanian G&G service company to integrate all these results in a basin scale petroleum system oriented study aiming to outline areas for focusing the 2011-2012 seismic and drilling program. See Regional Basement map below generated by Danubian.

The initial 2D seismic data over the concession area totals approximately 681 km (423 miles) and was shot by ROC Oil of Australia.554 km was acquired in Block 13, and 127 km in Block 14. Gobi did not reprocess the existing data due to the good quality of the data, but started in 2010 a focused and steered seismic acquisition program aiming to fill the data gaps and delineate drillable prospects. In 2010, 186 miles (300 km) of new data (150 km on Block 13 and 150 km on Block 14) were acquired using DQE International (a subsidiary of CNPC Daqing). This was followed by the 2011 seismic program comprising 1310 km (709 miles) using seismic acquisition branch of Sinopec. The seismic acquisition ended in late November 2011, processing of the data has been finalized and interpretation is ongoing. The quality of data is good and indicates promising prospects and leads which are currently under evaluation.

2011 Seismic acquisition program coverage

Example of the 2011 seismic survey results