Date: 17 September 2008

To: Elliot Yearsley, Australian Worldwide Exploration Ltd. (AWE)

From: Erik Layman, Layman Energy Associates, Inc. (LEA)

RE: PRELIMINARY RESOURCE ASSESSMENT, NGEBEL GEOTHERMAL PROSPECT, E. JAVA

1.0 SUMMARY AND CONCLUSIONS

The Ngebel area in East Java is an attractive geothermal prospect based on its location in a
Quaternary andesitic volcanic highland; the presence of surface thermal features spread across a 2
kilometer long zone; overlapping geophysical anomalies; and encouraging shallow drilling results.
Two extensive low resistivity anomalies defined by Schlumberger mapping (Telaga Ngebel–Pandosan
in the west & G. Manjutan-G. Hargokalangan in the east) are coincident with an area of nested
volcanic vents in the highland terrain. The western Telaga Ngebel resistivity low encloses the area of
the surface thermal features, providing a strong link with geothermal activity. Positive gravity
anomalies in part overlap the two low resistivity zones, possibly reflecting underlying dense intrusive
bodies which may supply heat to geothermal resources in these areas. Modeling of the resistivity data
shows that the apparent separation of the two low resistivity zones may in fact be a result of
topographic effects. Modeling has defined a single low-resistivity layer extending across the entire
prospect area, with a dome-like structure centered in the eastern Manjutan-Hargokalangan area. In
geothermal systems in andesitic volcanic areas, such dome structures developed in the electrically
conductive layer often are associated with the highest temperature, central upwelling zones.

Four shallow (180-500 meter) gradient holes were drilled within the western Telaga Ngebel resistivity
anomaly. The hottest of these (WSH-02) appears to have intersected a productive zone at about 400-
450 meters depth with a maximum temperature in the range of 140-150°C. Permeability is indicated
by fluid loss zones and “blow outs” reported in this interval during drilling, and a shut-in wellhead
pressure which built to 242 psi. A temperature reversal is associated with the productive zone,
indicating the well has most likely intersected a laterally flowing zone of thermal fluids, or outflow zone.
The reservoir fluid as indicated by analysis of downhole samples is a benign, neutral pH, Na-Cl-HCO3
fluid with low salinity, and thus should pose no problem for commercial exploitation. Chemical
geothermometer calculations (quartz and cation) for this fluid indicate reservoir temperatures in the
range of 170-195°C, lower than the typical 250-300°C range for andesite volcanic-hosted geothermal
systems in Indonesia and elsewhere.

A “most likely” geothermal resource model for the Ngebel prospect includes a central zone of thermal
upwelling in the area between G. Manjutan and G. Hargokalangan, with lateral outflow of thermal
fluids to the west towards Telaga Ngebel. WSH-02 appears to have intersected this outflow zone in
the potentially productive interval at 400-450 meters depth. The relatively low geochemical reservoir
temperatures for WSH-02 fluids may reflect the approximately 8 kilometer distance between this
drillhole and the center of the inferred upflow zone to the east, allowing thermal fluids to cool and
partially re-equilibrate along the flow path. This model needs to be confirmed by: 1) drilling in the
Manjutan-Hargokalangan area, as no holes have yet been drilled in this area to demonstrate that
anomalous heat is present; and 2) deeper drilling in the Telaga Ngebel area near WSH-02 to verify
that temperatures remain low beneath the inferred outflow zone. A “less likely” alternative model
includes two separate upflow zones, one at Pandosan-Telaga Ngebel, the other in the Manjutan-
Hargokalangan area.
An estimate of the electrical generation capacity of the Ngebel resource can be made by analogy with
many exploited high-temperature (>220 deg C) volcanic-hosted geothermal reservoirs located
worldwide. Application of power density and suitable exploratory risk factors to the 38 square
kilometer prospective area at Manjutan-Hargokalangan yields an estimated potential electrical
generation capacity of 140-240 MW. Additional upside is provided by the potential to develop the
lower temperature outflow zone at Pandosan-Telaga Ngebel using binary power plant technology.
Planning for any development in the Pandosan-Telaga Ngebel area will need to take into account high
population densities and intensive agricultural use. Should the less likely alternative resource model
prove correct, the 22 km2 prospective area at Pandosan-Telaga Ngebel could be developed with flash
plant technology, and would have an estimated potential electrical generation capacity of 80-140 MW.

2.0 INTRODUCTION

This preliminary resource assessment of the Ngebel geothermal prospect was prepared by Layman
Energy Associates, Inc. (LEA) under the direction of Elliot Yearsley at the Jakarta office of Australia
Worldwide Exploration Ltd (AWE). AWE is considering submitting a bid to the Government of
Indonesia (GOI) for exploration and development of the Ngebel prospect at such time when the details
of the tender process are finalized. The objective of this report is to provide an assessment of the
Ngebel geothermal prospect which will form the basis for subsequent design of a geothermal
exploration program to be proposed by AWE to the GOI as part of the tender process.

The Ngebel geothermal prospect is located in East Java, Indonesia, approximately 20 kilometers
southeast of the city of Madiun, and a similar distance northeast from the city of Ponorogo. The
prospect lies within a rugged Quaternary volcanic highland of the Wilis mountain range (pengunungan
Wilis), with elevations ranging from about 500 to 2,000 meters a.s.l. (Figure 1). Much of the earlier
exploratory work by GOI was focussed in an area of surface thermal features along the valley of the
Dagangan River, centered about 2 kilometers southeast of Telaga Ngebel. Telaga Ngebel is a
volcanic crater lake covering about 2 square kilometers, located on the west flank of the volcanic
highland at an elevation of about 730 meters a.s.l. The region around Telaga Ngebel is well populated
with abundant small villages, and the valley of the Dagangan River is intensively cultivated with rice
paddies (sawah) (Figure 2). Further to the east, between the peaks of Mount (Gunung, abbrev. “G.”)
Manjutan and G. Hargokalangan, the population is much more sparse with only a few scattered
villages.

To conduct this desk top study, LEA reviewed a number of reports which AWE staff obtained from the
GOI. The GOI, principally through the state oil company PERTAMINA, conducted a fairly extensive
program of exploratory work in the Ngebel area during the 1980’s and 1990’s, including geologic,
geochemical and geophysical surveys and shallow gradient hole drilling. Hartono et al (1992)
provided a basic geologic map of the region, and this work was supplemented herein by LEA’s own
analysis of satellite imagery and topographic data. Shallow drillhole data was described in PT Serba
Multi Sarana (1988); PT Geoservices (1990); and PT Mitrayasa Kelana Sejati (1992). Geophysical
surveys conducted included Schlumberger resistivity, gravity, magnetotelluric resistivity and self
potential. These were described in NV Alico (1986); PT Serba Multi Sarana (1988 a,b); PT
Cakrabuana Perkasa (1991); and LEMIGAS (1999).

LEA did not access several other reports on the Ngebel area which were included on a list provided by
AWE. These included reports on a CSMAT resistivity survey; a micro-earthquake survey; field rock
sample petrography study; air photo analysis; soil gas survey; head-on resistivity survey; and water
and sediment analyses. AWE and LEA agreed that this information was not critical for the analysis,
given the availability and sufficiency of key data included in the reports described above and listed in
the references section of this report.

3
3.0 REVIEW OF KEY RESOURCE DATA

3.1 Geologic Setting

Geologic mapping by Hartono et al (1992) indicates that Ngebel geothermal prospect lies entirely
within the west-central portion of the Wilis range volcanic highland (Figure 3). The volcanic highland,
of roughly circular outline with a diameter of about 50 kilometers, is composed largely of andesitic
lavas, volcanic breccias and tuffs of Quaternary age. Volcanic vents as mapped by Hartono et al
extend along a 35 kilometer-long, east-west trending belt, extending from Telaga Ngebel on the west
to G. Klotok on the east. This belt broadly defines the “volcanic axis” for the Wilis volcanic highland,
within which magmatic heat sources and geothermal resources are likely to occur. The Ngebel
prospect occurs within a 10 x 15 kilometer region on the west central end of the Wilis volcanic axis.
The region extends from near Telaga Ngebel on the west to G. Hargokalangan on the east, and from
G. Beser-Patukbanteng on the south to G. Manjutan on the north.

From analysis of satellite imagery and topographic data, LEA has mapped in greater detail the
distribution of inferred volcanic vents in this region (Figure 4). This region appears to be dominated
by a series of nested, relatively mature volcanic depressions which are extensively breached by
erosion, and thus are marked by U-shaped or semi-circular depressions. The closed depressions or
craters at Telaga Ngebel and the small craters at G. Kayangan and G. Kembar to the southeast are
much less eroded and likely to represent the youngest phase of volcanic activity in the area.
Relatively well-defined volcanic cones are interpreted at: G. Manjutan / Kukusan, with breached
craters open to the southwest; G. Hargorawang; and at G. Hargokalangan, which appears to have
formed within a volcanic depression developed on the northwest flank of G. Hargorawang which is
open to the northwest.

As discussed below, surface thermal features and the central portions of key geophysical anomalies
(Figure 20) are contained within the area of nested Quaternary volcanic vents. This region is roughly
bounded by a line running from Telaga Ngebel northeast to G. Manjutan, thence southeast to G.
Hargokalangan, thence southwest to G. Batusoko, thence northwest back to Telaga Ngebel.
Magmatic heat sources underlying this area of volcanic vents are likely to supply heat to geothermal
resources located in the same area.

3.2 Distribution and Chemistry of Surface Thermal Features

Surface thermal features at the Ngebel prospect are located to the southeast of Telaga Ngebel
(Figures 2 & 3). These include thermal springs at Pandosan along the Dagangan River; another
thermal springs at Tulun(?) approximately 700 meters to the north, and a fumarolic area with
associated thermal springs at Glagah Ombo, roughly 2 kilometers northeast of the Pandosan springs.
The Pandosan springs are well-located on a detailed map with UTM coordinates in PT Mitrayasa
Kelana Sejati (1992). In contrast, locations for the Tulun (?) springs and the fumarolic area are very
approximate due to the poor quality of maps provided in other reports.

The results of chemical analyses of the thermal springs are provided in Table 1. The thermal waters
at Pandosan are neutral-pH, Na-Ca-Cl-HCO3 waters with total dissolved solids (TDS) ranging from
2,000-3,900 parts per million (ppm) and significant Mg levels at 48-77 ppm. Cl levels range from 700-
1600 ppm. This type of thermal water is very commonly associated with Indonesian geothermal
systems in areas of elevated volcanic terrain. They appear to represent mixtures of neutral pH, Na-Cl
waters of deep, high-temperature origin with shallower, cooler groundwaters rich in HCO3 and Mg.

Thermal waters sampled in the Glagah Ombo fumarolic area are acid-SO4 waters, which typically
form by heating of shallow groundwaters by H2S-bearing steam. The fluid acidity and high sulfate
content results from dissolution of H2S into the liquid. The Tulun thermal waters are similar, but are

4
slightly less acid and have higher Cl content (pH 3.4 and 235 ppm Cl, vs. pH 2.0 and 33 ppm Cl for
Glagah Ombo).
In some cases, the presence of Cl in acid-SO4 thermal waters can indicate an influx of magmatic
steam and associated gases such as HCl into shallow groundwaters and the associated concerns
regarding acidity and corrosivity of deep reservoir fluids. At Glagah Ombo and Tulun, the presence of
Cl in the acid-sulfate fluids is more likely to indicate mixing of acid sulfate “end member” waters with
neutral pH, Cl-bearing thermal waters similar to the Pandosan thermal springs. This is considered
likely in part because Tulun with higher Cl content is less acid than Glagah Ombo. Typically the higher
the Cl content the more acid is the fluid for acid-Cl-SO4 springs formed by dissolution of volcanic HCl
gas into groundwaters. Moreover, waters produced from the nearby gradient hole WSH-02 at a depth
of about 400 meters are classic neutral pH, Na-Cl-HCO3 geothermal waters of deep origin with no
evidence of input of corrosive magmatic gases (see table 1; discussion in section 3.5.2).

A plot of dissolved chloride (Cl) vs. boron (B) was constructed to assess relationships between various
Ngebel thermal waters (Figure 5). These elements are considered “conservative” and non-reactive,
and thus the plot can provide an indication of mixing and/or dilution trends. The linear relationship on
the plot (~constant Cl./B ratio) between the WSH-02 and Pandosan thermal spring water suggests the
Pandosan springs are related to the WSH-02 waters by dilution with fresh groundwaters with near zero
levels of B and Cl. A separate but less well defined trend is indicated for the steam-heated waters at
Tulun and Glagah Ombo. It is likely, as described above, that Cl present in these steam-heated
waters results from mixing of end-member acid-sulfate waters with varying proportions of Cl-bearing
Pandosan or WSH-02 type waters.

Geothermometry: Estimated reservoir temperatures based on the standard chemical

geothermometers are provided for Ngebel thermal waters in Table 1. No such calculations were done
for the acid-sulfate waters at Tulun and Glagah Ombo as the acidity of these waters invalidates the ion
solubility assumptions on which the geothermometers are based. The neutral pH Pandosan hot
springs waters yield quartz (conductive) temperatures in the range of 150-170°C. While the cation
geothermometers yield significantly higher temperatures (205-214°C for Na-K-Ca; 252-271°C for Na-
K), the validity of these higher figures is questionable due to the high levels of Mg in these waters (48-
77 ppm). The high Mg levels indicate these waters have equilibrated at relatively shallow depth at
moderate temperature, possibly in the 150-170°C range indicated by the quartz geothermometer.
High temperature geothermal fluids of low salinity invariably have Mg contents of only a few ppm or
less, as in the thermal water from WSH-02, as described above and in section 3.5. Cation
geothermometers for the low-Mg WSH-02 water thermal water reach up to 195°C.

3.3 Gravity Survey Results

PT Serba Multi Sarana (1988 a;b) conducted a 279-station gravity survey in the Ngebel area under
contract to PERTAMINA. The reader is referred to the PT SMS reports for a detailed description of the
data acquisition and reduction procedures. Key results of the survey are presented as a map of
Bouguer gravity based on a reduction density of 2.3 g/cc (Figure 6). The value 2.3 g/cc was
determined to be the optimum reduction density based on Nettleton profile analysis conducted by PT
SMS.

The major gravity feature in the Ngebel area is an elongate, NNE-trending gravity positive or “ridge”.
This feature extends for about 20 kilometers from the village of Pulung on the SW to an area about 3
kilometers NE of G. Kukusan. The ridge is asymmetric, with steeper gravity gradients on the western
margin compared to the eastern margin. The steep-sided, linear western margin to the gravity ridge
likely reflects a NNE-trending structural zone passing just east of Telaga Ngebel and through the area
of surface thermal features at Pandosan, Tulun and Glagah Ombo. This fault zone would be
downthrown on its NW side, resulting in accumulation of a greater thickness of relatively lower density
volcanics west of the structure. This structure may provide a pathway for thermal fluids and steam
discharge to the surface at the three identified sites SE of Telaga Ngebel.

5
Two localized and well-defined “highs” occur at each end of the elongate gravity ridge, separated by a
saddle with relatively lower gravity. The northern gravity positive or high is centered between G.
Manjutan and G. Hargokalangan, and is roughly circular with a diameter of about 5 kilometers. The
northern positive is centered within an area of inferred Quaternary volcanic vents (Figure 4), and may
indicate the presence of a relatively dense, andesitic intrusive mass which may be still cooling and
supplying heat to a geothermal system centered in this area. The southern gravity positive elongate in
a NNE direction with dimensions 4 x 7 kilometers, and is centered about 4 kilometers south of Telga
Ngebel. The north end of this feature slightly overlaps the southern margin of volcanic vents mapped
SE of Telaga Ngebel, but appears less directly connected with Quaternary volcanic activity than is the
northern “high”. Besides a cooling intrusive mass, this southern gravity positive could represent an
older intrusive mass, or possibly an area of relatively shallow basement rocks.

3.4 Resistivity Survey Results

Resistivity survey data obtained for the Ngebel prospect area included 60 Schlumberger vertical
electrical soundings (VES) acquired by PT Serba Multi Sarana (1988a;b) and 18 magnetotelluric (MT)
soundings acquired by NV Alico (1986).

The NV Alico MT data set is not emphasized in this analysis because the data is presumed to be of
poor quality This MT survey was part of a very large scale, multi-project MT data acquisition and
interpretation program conducted by NV Alico for PERTAMINA in the mid-1980’s. In the late 1990’s,
as part of CalEnergy’s exploration program at Dieng and Patuha, MT specialists at Geosystem srl
(Italy) reviewed the NV Alico data set for these two areas. Their analysis indicated significant
problems with both data acquisition and interpretation, in part because the data were acquired when
MT survey methodologies were still evolving. The Ngebel MT data set is thus presumed to be of
similar low quality.

Schlumberger resistivity surveys involve a more straightforward data acquisition and interpretation
process than MT surveys, and this technique has a long history of successful use. The reader is
referred to PT Serba Multi Sarana (1988a;b) for a detailed description of the data acquisition and
interpretation procedures used in the Ngebel survey. Data was acquired at various electrode spacings
at each sounding location to achieve variable depth penetration (AB/2= 250, 500, 750, & 1000
meters). For this analysis, we have emphasized the data reported which was acquired at the widest
electrode spacing (AB/2 = 1,000 meters) to achieve greater depth penetration. Experience with other
Indonesia geothermal systems located in volcanic highlands has shown that use of wider electrode
spacings is important to help “see through” very resistive, shallow and unaltered volcanic rocks in such
rugged terrain.

Apparent resistivity mapping: A map of Schlumberger apparent resistivity at electrode spacing

AB/2=1,000 meters is provided in Figure 7. The apparent resistivity contours are shown as drawn on
the PT SMS maps which did not show the resistivity value at each data point, thus the contours have
not been checked against the data points..

The dominant feature is an ENE-trending elliptical-shaped zone of low resistivity centered SW of

Telaga Ngebel with maximum dimensions about 5 x 10 kilometers. Apparent resistivity values are
below 15 ohm-meters (ohm-m) in the central portions of the anomaly. This low resistivity zone occurs
at elevations between about 400-1000 meters a.s.l., and encloses the three surface thermal features
and all of the shallow gradient hole locations. More detailed mapping of this same feature, derived
from the same PT SMS data data set, is provided in Figure 8. The apparent resistivity values at
AB/2=1,000 m have been re-contoured based on the resistivity data points included in a map from
LEMIGAS (1999). This map shows that along its eastern half, the axis of the low resistivity zone
closely follows the axis of the Dagangan River valley and terminates fairly abruptly into the
mountainous terrain to the east and south. This suggests a significant topographic effect of the
resistive volcanic terrain on the Schlumberger resistivity data, even at this wide electrode spacing.
The anomalous area of low subsurface resistivity may therefore be potentially more widespread and

6
continue into surrounding areas of higher topography to the south and east. This is supported by
modeling of the Schlumberger data and mapping of the low resistivity layer across the field (see
below).

A less impressive zone of relatively low resistivity (<30 ohm-m at AB/2=1,000 m) occurs in the area
between G. Manjutan and G. Hargokalangan, at elevations between about 800-1,500 meters a.s.l.
(Figure 7). This irregularly-shaped anomaly extends for about 7 kilometers between the two volcanic
peaks. It is separated from the “main” low resistivity anomaly south of Telaga Ngebel by a resistive
zone which coincides roughly with the ridgeline near G. Kemlandingan which rises to about 1300
meters a.s.l.

Modeling of Schlumberger resistivity data: PT SMS used combined curve matching and 1-D
computer modeling of the Schlumberger apparent resistivity sounding data to interpret “true” earth
resistivity structure for each sounding location. The primary output was a layered resistivity model for
each sounding. As is typical for Indonesian geothermal systems, most soundings at Ngebel identified
a near-surface resistive layer above a conductive (low-resistivity) layer. In-depth studies in other
volcanic areas have shown the conductive layer typically corresponds to argillic-altered (hydrothermal
clay) volcanic rocks forming a halo over the high temperature reservoir. The near-surface resistive
layer corresponds to largely fresh, unaltered volcanic rocks. A deeper resistive layer may also be
detected below the conductor which typically corresponds to propylitically-altered, clay-poor rocks
associated with the high-temperature reservoir zone.

The results of the PT SMS modeling efforts are summarized in a map of the elevation of the top of the
conductive layer (Figure 9) and two mostly E-W running resistivity cross-sections (lines A & B;
Figures 10 & 11). The cross-sections show the classic conductive layer, characteristic of Indonesian
geothermal systems, overlain by the near-surface resistive layer. Line B shows that drillhole WSH-02
penetrated at least 250 meters into the conductive layer, while WLS-1 and WLS-2 barely reached the
top of this zone.

The conductive layer, with interpreted resistivity values ranging from 5-20 ohm-m, extends through
nearly the entire survey area, including higher elevation areas to the east of the main resistivity low
associated with the surface thermal features. A good example is provided by station 220 at the east
end of the section line in Figure 11, which lies at ~1400 meters elevation. Interpretation of this
sounding indicates a 13 ohm-m layer is encountered at a depth of about 400 meters.

The top of conductor elevation map of Figure 9 includes elevation contours taken directly from the PT
SMS report. The map shows a dome-like structure or “high” in the conductor top centered between G.
Manjutan and G. Hargokalangan. The main axis of the high trends roughly WNW, and a subsidiary
lobe or high extends to the SW and W through the area of the thermal features and shallow drillholes
south of Telaga Ngebel. Drilling results show that similar dome-like structures developed in the
conductive layer (or in the base of the conductive layer) typically overlie the productive, central zone of
upwelling in high-temperature, volcanic geothermal systems 1. Well-documented examples include the
Tongonan, Philippines and Berlin, El Salvador geothermal fields. Outflow zones, characterized by
laterally flowing thermal fluids which are cooler than the central upwelling zone, may be indicated on
the top of conductor map by subsidiary lobes extending away from the main dome feature.

The top of conductor elevation map suggests a more unified picture of the Ngebel resource compared
to more compartmentalized view of separate anomalies provided by the apparent resistivity map of
Figure 7. This reflects the fact that the conductive layer is present over a wide area as indicated by
the modeling results. The top of conductor map supports the view that the center of thermal upwelling
at Ngebel is located between G. Manjutan and G. Hargokalangan, and that the surface thermal
features south of Telaga Ngebel may overlie an outflow zone.

1
Anderson, Crosby and Ussher, Proceedings World Geoth. Congress 2000, pp. 909-914.

7
The modeling of the Schlumberger data for Ngebel did not detect a resistive layer below the low
resistivity / conductive layer. A deep resistor, as described above, is often present and associated with
clay-poor, propylitically altered rocks in and around the high-temperature reservoir. The lack of a deep
resistor in this case likely reflects the limited depth penetration of the Schlumberger method, possibly
combined with a relatively greater thickness of the conductive layer at Ngebel. While the NV Alico MT
survey results are probably best not utilized in a quantitative manner, modeled resistivity cross-
sections from the MT survey included in PT Cakrabuan Perkasa (1991) consistently show a deep
resistor underlying the conductive layer at depths of 1,000-1,700 meters. This indicates that the
conductor-over-resistor interface may be too deep for detection with the Schlumberger method.

3.5 Shallow Drillhole Results

In the late 1980’s and early 1990’s the GOI drilled at least 4 shallow thermal gradient drillholes
(“slimholes”) in the area south of Telaga Ngebel area (Figures 1 & 2). These include drillholes WLS-1
and 2 (PT Serba Multi Sarana, 1988; “PT SMS”); WLS-3 (PT Geoservices, 1990); and WSH-02 (PT
Mitrayasa Kelana Sejati, 1992; “PT MKS”). A fifth hole, WSH-01, is shown on a map in the PT MKS
report but there was no information on this hole included in the package of Ngebel data provided by
AWE. WSH-01, if in fact it was drilled, was apparently located less than about 300 meters south of
WLS-3.

A composite plot of downhole temperature profiles with the longest heating times (where known) for all
4 drillholes is provided in Figure 12. Composite plots of all available temperature profiles for each
individual well are provided in Figures 13-16. In addition to the temperature profiles for WSH-02, a
summary of lithology, casing configuration and fluid loss zones is included in Figure 16, while
downhole pressure profiles for WSH-02 are shown on Figure 17. Fluid chemistry data for WSH-02 is
provided in Table 1 & Figure 5.

3.5.1 “WLS” Series Drillholes

WLS-1
WLS-1 was drilled to a total depth of 275 meters and apparently completed with 1.5-inch PVC pipe for
temperature measurements. The formation penetrated included andesite lava flows, tuffs and tuff
breccias. Hydrothermal alteration intensity was nil above ~110 meters; below 110 meters alteration
intensity was weak with some hydrothermal clay and calcite noted.

Temperature profiles for WLS-1 (Figure 13) include three measured during drilling and one measured
after 30 days heating after driling, though the latter only reached 235 meters. These profiles show that
the hole is essentially cold and isothermal down to a depth of about 100 meters, below which thermal
gradients gradually increase. The average thermal gradient below 215 meters on the 30-day heating
survey is 109°C/km, which is approximately 2.4 times the regional background gradient of ~45°C/km.
The maximum temperature measured on this survey was 31.0°C.

The “near-surface isothermal zone” down to 100 meters depth probably reflects the movement of cool
groundwater through unaltered, porous volcanics. Increasing thermal gradients below 100 meters
suggest that increasing levels of hydrothermal alteration with depth have reduced formation porosity,
limited groundwater flow and thus allowed conductive heat flow from depth to occur.

WLS-2
WLS-2 was drilled to a total depth of 180 meters and apparently completed with 1.5-inch PVC pipe for
temperature measurements. The formation penetrated was a section of hydrothermally altered
andesitic tuffs, with abundant hydrothermal clay and lesser amounts of pyrite and silica.

Temperature profiles for WLS-2 (Figure 14) include measurements at 2, 18 and 24 days heating after
drilling. The maximum temperature measured was just 21.7°C. These profiles show that the well was

8
completed entirely in the near-surface isothermal zone, and was not drilled deep enough to penetrate
the thermally conductive layer. While the lithologic description indicates that the level of hydrothermal
alteration is significant, apparently the formation remained sufficiently porous and permeable down to
180 meters to permit flow of cool groundwater.

WLS-3
WLS-3 was drilled to a total depth of 500 meters. The drilling history indicates 6-inch casing was set
at 24 meters, but details are lacking regarding other casing strings, or how the well was completed
upon reaching the total depth. The formation penetrated included primarily tuff breccia with lesser
amounts of tuff and andesite lava flows. Hydrothermal alteration intensity generally increases with
depth, reaching about 20% at 180 meters, increasing to 75-80% below 350 meters. Alteration
minerals included abundant clay with lesser amounts of calcite and silica. Loss of circulation occurred
while drilling at 54 m; 93 m; 233 m; and 247 m. At 271 m circulation was lost again and not regained.

Temperature profiles for WLS-2 (Figure 15) included three separate runs. Unfortunately the PT
Geoservices report included no information the dates or under what conditions these surveys were
conducted. It is likely that runs 1 and 2 took place during drilling operations. The profiles show that
the near-surface isothermal zone extends to a depth of about 280 meters. This zone is associated
with fluid loss zones during drilling, indicating permeable formations which allow flow of cool, shallow
ground water. Below 280 meters depth, fairly consistent conductive thermal gradients are established.
The average thermal gradient between 380-480 meters is 144°C/km, or about 3.2 times typical
regional background gradients.

3.5.2 Drillhole WSH-02

WSH-02, drilled to a depth of 504 meters, was substantially hotter than the other 3 holes and appears
to have intersected a productive interval near the bottom of the well. A summary diagram for WSH-02
including temperature surveys, lithology, completion, and permeable zones is provided in Figure 16,
and pressure surveys are provided in Figure 17.

Location: WSH-02 was located about 70 meters west of the Pandosan hot springs group, on a
hillside about 15 meters above the Dagangan River (shown as Pandosan River on some maps). The
drillsite is immediately adjacent to a tight bend in a road which crosses the Dagangan River via a
bridge just west of the Pandosan hot springs. The bridge is about 60 meters ESE from the wellsite.
The UTM coordinates provided in the PT MKS report are: 569,952 m E / 9,135,910 m N, with elevation
630.7 meters a.s.l.

Completion: WSH-02 was completed on 28 October 1992. The casing configuration included
cemented 7-inch casing to 50 meters and cemented 4.5-inch casing from 50-260 meters. A string of
3.5-inch un-cemented casing was hung from 223 meters to the total depth of 504 meters, and was
slotted below 404 meters to allow influx of formation fluids.

Lithology and hydrothermal alteration: From surface to 450 meters, the hole penetrated a volcanic
sequence composed primarily of tuffs with lesser amounts of tuff breccias and andesite flows. From
455 meters to the total depth, the hole encountered a diorite intrusive. The lithology log shows
alteration intensity generally increasing from 10-20% secondary minerals in the near surface to 50% at
200 meters. Below 200 meters the alteration intensity is fairly constant at about 50% to the total
depth, with local departures to near 60-70% near about 390 m; 410 m; 440 m; 455m and 485 m. The
reported hydrothermal mineral assemblages are as follows:

 10-280 m: clay + pyrite + “chlorite” (probably smectite clay)

 280-455 m: clay + quartz + calcite + “chlorite” (may be smectite clay)
 455-504 m (in diorite): clay + quartz + pyrite + chlorite + calcite + epidote (propylitic
assemblage)

9
The presence of epidote is normally an indicator of formation temperatures above at least 200°C, if it
is not “relict” and out of equilibrium with current formation temperatures. The wellbore temperature
data (see below) indicates temperatures significantly below 200°C, thus the epidote appears to be
relict in this case.

Fluid loss / permeable zones: According to the lithology log included in the PT MKS report, WSH-02
encountered a number of permeable zones below 402 meters depth. These may comprise a
productive interval based on measured temperatures in this zone near 150°C (see below). No
shallower fluid loss zones were reported. The limited descriptions of the permeable intervals on the
log are verbatim as follows:

 402 m: blow out, p=250 psi

 413 m: loss, 433 liters/min; blow out, p=350 psi
 486 m: blow out, p=350 psi, t=59°C
 487.5 m: blow out, p=700 psi
 498 m: blow out, p=350 psi, t=62°C

No further details on the “blow outs” are provided to determine how long the well flowed after each
event, flow rates, or how the flow was controlled. It is also not clear if the lower zones represent re-
activation of the upper zones or are in fact separate permeable zones. The reported “blow out”
temperatures are very far below saturation for the reported pressures, indicating the cold condition of
the well. Nonetheless, the indication that the well was ready to flow even under cold drilling conditions
was a strong indication of good formation permeability.

Wellbore temperature: Temperature profiles for WSH-02 include one measured during drilling, and
three others measured at 10, 17 and 20 days heating after drilling. Tabular data was available in the
PT MKS report for all surveys except the 20-day heating survey, for which temperature-depth values
were obtained from a graphical plot. The 10- and 17-day heating surveys are quite similar in form: a)
modest thermal gradients down to about 270 meters; b) very steep gradient from 270-300 meters, c)
decreasing gradients below 300 meters; and d) a temperature maximum at about 450 meters below
which temperatures decrease. About 10-15°C of heating was observed between the 10- and 17-day
surveys, with temperature maxima of 123°C and 137°C respectively.

The 20-day temperature profile (17 Nov 1992) shows a different form than the prior 2 surveys: very
high thermal gradients at shallow depths above 100 meters, gradually decreasing with depth until a
temperature maximum of 149.5°C is reached at 400 meters, below which temperatures decrease.
Depending upon the depth, the 20-day heating survey showed a very large 20-50°C increase in
temperature compared to the survey conducted 3 days prior. This is a much larger increase than
observed during the 7-day period between the 10-day and 17-day heating surveys. This is a physical
impossibility for a static well, because the rate of heating in such wells always decreases with time
after cessation of drilling operations and the associated the disturbance to formation temperatures.

Possible explanations for the unusual degree of heating between the final survey on 17 November and
survey 3 days previous may include:
1. The reported date for the 17 November survey is incorrect and is actually several weeks later,
consistent with greater heating;
2. The temperature tool run on 17 November was faulty and/or out of calibration.
3. Weak intra-wellbore flow may have developed after 14 November and allowed hotter water
from the bottom of the well to flow up to shallow depths, possibly exiting the well via a breach
in the casing near 50 meters depth;
4. The well may have been allowed to flow between the two static surveys on 14 and 17
November, which accelerated heating in the likely production zone near 400 meters (see
below), and conductively heated the wellbore above this depth.

10
Without further information it is difficult to determine which of the above alternatives is more likely.

The PT MKS report (page 2) indicates that geophysical logs could not be run when the well reached a
depth of 300 meters because “temperatures in the wellbore were too high for logging (above 180°C)”.
The evidence for wellbore temperatures this high is weak because: a) there are no details provided
regarding the logging tool temperature limits; b) the tool could have failed for other reasons: and 3) as
described above the maximum wellbore temperature based on downhole surveys after 20 days
heating is about 149.5°C. This is corroborated by lower maximum temperatures observed on prior
surveys, as described above.

Wellbore pressure: Wellbore pressure surveys for WSH-02 (Figure 17) show that as the well heated
over time the wellhead pressure rose and the water level was pushed down, presumably by the
accumulation of gas at the wellhead derived from the productive interval at depth. The water level is
marked by the change from hydrostatic to vaporstatic pressure gradients on the profiles. The surveys
indicate wellhead pressures rose from <25 psi on 7 November 1992, to 85 psi on 14 November, to 128
psi on 17 November. Wellhead pressures rose to 242 psi in “December 1992”, as observed during
downhole fluid sampling operations. The rise in wellhead pressure is an indication that the well may
have intersected a geothermal reservoir, though this does not necessary indicate that the permeability
of this zone sufficient for commercial production.

Fluid chemistry: In December 1992, PT MKS collected 4 downhole samples from WSH-02 at depths
of 300 meters, 400 meters (X2), and 425 meters. The results of chemical analyses of these samples
are shown in Table 1. The second sample at 400 meters and the 425 meter sample show no obvious
problems with the analyses and very consistent results. These indicate that the WSH-02 thermal
fluids are neutral pH, Na-Cl-HCO3 waters with total dissolved solids of about 7,000-8,400 ppm. This
low salinity, neutral-pH fluid is quite benign and fully amenable to commercial exploitation for power
production.

The very low Mg contents in the above two samples (~2 ppm) strongly suggests they originate in a
deep, high-temperature reservoir. This is supported by standard chemical geothermometer
calculations: T Na-K-Ca = 180-195°C; T Na-K = 174-179°C; and T quartz conductive = 169-172°C.
These geothermometer values are higher than the maximum measured well temperature of 149.5°C,
indicating higher temperatures may be encountered at depth or laterally away from the well. The
range of the chemical geothermometer temperatures (169-195°C) is relatively low compared to typical
volcanic-hosted Indonesian geothermal systems, most of which exhibit reservoir temperatures from
240°C to over 300°C.

The 300 meter sample and the first sample at 400 meters show evidence of analytical and/or sampling
problems, or possibly contamination issues. Both samples have significantly high Mg levels and
unusually low Si02 values, indicating possible contamination by shallow, cooler waters. The 300
meter sample analysis shows unusually high SO4 levels and significantly higher total dissolved solids
than the other three samples. The first 400 meter sample shows impossibly high Fe content. Further
analysis of problems associated with these two samples is beyond the scope of this study.

3.5.3 Overview of Ngebel Shallow Drilling Results

WSH-02 is clearly the hottest of the 4 holes drilled, and appears to have intersected a productive zone
at about 400-450 meters depth with a maximum temperature in the range of 140-150°C. Permeability
is indicated by fluid loss zones and “blow outs” reported in this interval, and the shut-in wellhead
pressure which built to 242 psi. There is a temperature reversal associated with the productive zone,
probably indicating the well has intersected a laterally flowing zone of thermal fluids, or outflow zone.
There are some questions regarding data quality and context of the final temperature survey for WSH-
02 which indicated 149.5°C in the productive zone. However, a previous survey indicated 137°C in
the same zone after 17 days heating, thus it is likely that the productive zone temperature is at least

11
140°C. The reservoir fluid as indicated by analysis of downhole samples is a benign, neutral pH, Na-
Cl-HCO3 fluid with low salinity. Chemical geothermometer calculations (quartz and cation) for this
fluid indicate reservoir temperatures in the range of 170-195°C, lower than the typical range of 250-
300°C for volcanic-hosted geothermal systems in Indonesia. This could potentially reflect the fact the
well was drilled in an outflow zone, separated by some distance from a central zone of upwelling
where reservoir temperatures may be closer to the typical range for Indonesian systems.

While the maximum temperatures of the other drillholes were not nearly as hot as WSH-02, elevated
thermal gradients were observed below the near-surface isothermal zone in WLS-1 (109°C/km; 2.4 X
background) and in WLS-3 (144°C/km; 3.2 X background). WLS-2 never penetrated through the near-
surface isothermal zone and thus no conductive thermal gradients were observed.

A map of the elevation of the base of the near-surface isothermal zone in the Ngebel shallow drillholes
(Figure 18) provides an indirect indication of sub-surface temperature distribution. This interface
appears to be controlled primarily by the depth at which hydrothermal alteration in the volcanic
sequence becomes significant, thus reducing formation porosity and permeability, inhibiting flow of
cool groundwater, and allowing conductive heat flow to occur. This map shows that this interface is
shallower in WSH-02 and decreases in elevation to the north towards WLS-1 and WLS-3.

A map of the elevation of the 140°C isotherm (Figure 19) was constructed based on the observed
140°C temperature in the latest survey in WSH-02 (17 November 1992), and extrapolations to depth in
WLS-1 and WLS-3 using the observed conductive thermal gradients in the bottom portions of these
holes. This map shows that the 140°C isotherm is much shallower at WSH-02 than at WLS-1 and
WLS-3. The projected depths to 140°C in WLS-1 and WLS-3 are 1,235 meters and 1,018 meters
respectively, versus about 320 meters in WSH-02.

4.0 INTERPRETIVE RESOURCE MODEL

A summary map for the Ngebel project area with key geophysical anomalies, thermal features and
drillhole locations is shown in Figure 20. This map highlights the overlapping low resistivity and
positive gravity anomalies at two locations: 1) south of Telaga Ngebel, including the area of surface
thermal features and shallow drill hole locations; and 2) an eastern area between G. Manjutan and G.
Hargokalangan which lacks thermal features and has not yet been drilled. The resistivity lows appear
to reflect electrically-conductive, clay-rich hydrothermal alteration of the volcanic sequence, as
observed in the lithology of the shallow drillholes south of Telaga Ngebel. The positive gravity
anomalies are likely to reflect buried andesitic intrusive bodies which, while solidified, may still be
cooling and supplying heat to geothermal systems in this area. WSH-02 intersected a diorite intrusive
body at a depth of 455 meters, and is located on the margin of the western gravity positive.

The Manjutan-Hargokalangan area is also the center of the dome-like structure developed on the top
of the low resistivity (electrically conductive) layer, determined by modeling of Schlumberger resistivity
data to underlie most of the project area. This dome crest area coincides closely with the central
regions of the gravity positive. A subsidiary “lobe” on the top of the conductive layer extends away
from the Manjutan-Hargokalangan area to the southwest and west, and passes through the center of
the resistivity low south of Telaga Ngebel. WSH-02, which intercepted a 140-150°C productive zone at
400-450 meters depth, is located in the middle of this subsidiary lobe. A NNE-trending structural zone
inferred from the gravity data passes just west of the surface thermal features, and may play a role in
channel thermal waters to the surface.

“Most likely” resource model: A most likely resource model for the Ngebel area (Figure 21), based
on an integrated interpretation of the available geoscientific and drill hole data, includes a both a
central, high-temperature upflow zone and an outflow zone of laterally flowing, cooler thermal fluids.
The major upflow zone is inferred to be centered in the region between G. Manjutan and G.
Hargokalangan. The coincidence of the gravity high with the crest of the dome in the conductive layer
in this area closely resembles the configuration in the central zone of upwelling at the Tongonan field

12
in the Philippines, where drilling has confirmed an intrusive body at depth. Drilling at a number of
other exploited geothermal fields had proven that dome structures developed in the conductive layer
provide an excellent “signature” for central zones of thermal upwelling.

A SW-directed outflow zone is inferred to originate in the Manjutan-Hargokalangan upflow region and
pass through the area of the surface thermal features. The outflow is inferred to follow the SW-
trending subsidiary lobe in the top of conductive layer which passes through this area. WSH-02 is
interpreted to have intersected this outflow zone at a depth of 400-450 meters. The intercept is
marked by a temperature maximum of 140-150°C associated with significant indications of
permeability, and decreasing temperatures with depth below this zone. This inferred outflow zone has
good potential to yield commercial production, with temperatures suitable for binary power generation.
High population densities and heavy agricultural land use will have to be taken into account in
planning for any development in this area.

The geologic control on the outflow zone is not known, but possibilities include a SW-trending
structural zone or the contact zone between the diorite intrusive and the overlying volcanic rocks. The
latter is supported by the fact that the permeable zone in WSH-02 is located very close to this intrusive
contact. A high-angle structural zone is supported by the fact that temperatures fall away fairly steeply
to the north of WSH-02 towards WLS-1 and WLS-3, as would be expected if the outflow was
channeled along a relatively narrow fault zone. The NNE-trending structure indicated by the gravity
data may provide a conduit for thermal fluids in the outflow zone to reach the surface.

The reservoir temperature in the inferred Manjutan-Hargokalangan upflow area is not known but is
assumed to be in well in excess of 200°C. This is based on observed chemical geothermometer
temperatures of up to 195°C for WSH-02 fluids, and the likelihood of significant cooling and re-
equilibration of thermal fluid chemistry along the 7 kilometer-long flow path from the presumed center
of upwelling to WSH-02.

Confirmation of this resource model would initially require: 1) slim hole drilling to test whether
anomalous thermal gradients are present in the inferred Manjutan-Hargokalangan upflow zone, which
is as yet un-drilled; and 2) deeper slim-hole drilling in the area of WSH-02 to verify that temperatures
do not significantly increase below the inferred center of the outflow zone at 400-450 meters depth.

“Less likely alternative” resource model: A less likely alternative resource model (Figure 22)
assumes there are two separate zones of thermal upwelling in the Ngebel region: the G. Manjutan-G.
Hargokalangan prospective area per the above description, and another in the area of overlapping
resistivity anomalies south of Telaga Ngebel (Pandosan-Telaga Ngebel prospective area). These two
zones would be separated by a relatively cool, low permeability region roughly coinciding with the NW-
trending ridgeline which includes G. Kemlandingan. The temperature of the Pandosan-Telaga Ngebel
upflow area would be <200°C based on the chemical geothermometer data from WSH-02 fluid. The
temperature of the upflow at Manjutan-Hargokalangan would in this case be unknown, as the WSH-02
fluids would be unrelated to this zone and no other information is available. This alternative model: 1)
emphasizes the separate low-resistivity and gravity anomalies at the two areas; 2) discounts the
importance of the elevation mapping of the conductive layer top which shows continuity between these
areas; and 3) assumes that the temperature reversal observed in WSH-02 is not significant, and that
temperatures will continue to increase with depth.

Potential field generation capacity: Estimates from the GOI typically ascribe to Ngebel a field
electrical generating capacity in the range of 50-60 Megawatts (MW). Based on the interpretations
herein, this figure is likely to significantly underestimate the size of this resource. The key
observations are:
1) the very large size of the Manjutan-Hargokalangan prospective area of approximately 38
square kilometers (km2); and
2) the additional potential for exploitation of Pandosan-Telaga Ngebel outflow zone using binary
power plant technology.

13
Should the “less likely alternative” resource model prove correct and the Pandosan-Telaga Ngebel
region in fact comprise a separate upflow zone, this would add an additional 22 km2 of prospective
area for development.

A simple and very preliminary estimate of the potential electrical generation capacity of the Ngebel
resource can be obtained using the analogy method. The analogy method is based on geothermal
industry experience with many high-temperature (>220 deg C) volcanic-hosted geothermal reservoirs
located worldwide. Data from many such resources indicates these are typically developed for
electrical power generation at a "power density" factor ranging from 15-25 MW per square kilometer of
productive reservoir area, with sustained outputs of 25 years or more. To evaluate undeveloped or
partially explored resources, the productive area size estimates are risk-adjusted according to the
relative degree of exploratory risk. Typical risk factors are:
 1.0 for a proven resource area (region fully proven to be productive by drilling and flow testing
of wells);
 0.5 for a probable resource area (region adjacent to proven resource indicated by geophysics
and/or gradient hole drilling to be prospective)
 0.25 for a prospective area (region with good resource potential; no nearby proven production)

Based on these criteria, a risk factor of 0.25 should reasonably be applied to the prospective areas at
the Ngebel prospect. For the Manjutan-Hargokalangan prospective area, the estimated potential
electrical generation capacity is 140-240 MW (38 km2 x 0.25 x 15 to 25 MW/km2). The resource
temperature at Manjutan-Hargokalangan is assumed to be well in excess of 200°C, and thus can be
developed with flash plant technology. Additional upside is provided by the potential to develop the
lower temperature outflow zone at Pandosan-Telaga Ngebel with shallow wells and binary power plant
technology.

Should the less likely alternative resource model prove correct, the 22 km2 prospective area at
Pandosan-Telaga Ngebel could be developed with flash plant technology. In that case, and using the
above approach, this area would have an estimated potential electrical generation capacity of 80-140
MW.

14
5.0 REFERENCES

Drillhole data:
P.T. Geoservices, 1990, Laporan pekerjaan pengumpulan data dari lubang pengukuran landaian suhu
bor dangkal/slimhole di Ngebel-Wilis, Jawa Timur: consultant report to Pertamina, dated 11 May 1990.

P.T. Mitrayasa Kelana Sejati, 1992, Pengumpulan data geologi, geokimia, geofisika serta pengukuran
landaian suhu dan tekanan sumur WSH-02, Ngebel-Wilis, Jawa Timur: consultant report to
Pertamina, dated 23 December 1992.

P.T. Serba Multi Sarana, 1988, Laporan akhir pemboran dangkal goetermal lokasi Wilis-1 dan Wilis-2,
Daerah Wilis, Jawa Timur: consultant report to Pertamina, precise data not provided.

Geology and Geophysics:

Hartono, U., Baharuddin and Brata, K., 1992, Geologi lembar Madium, Jawa: Republic of Indonesia,
Department of Mines and Geology, Directorate General of Geology and Mineral Resources,
Geological Research and Development Centre.

LEMIGAS, 1999, Penelitian panasbumi daerah telogo Ngebel, Ponorogo, Jawa Timur: Pusat
Penelitian dan Pengembangan Teknologi Minyak dan Gas Bumi, Bidang Litbang Teknologi Eksplorasi.

N.V. Alico, 1986, Magetotelluric interpretation for geothermal investigations in Gunung Ngebel Wilis
area, East Java, Indonesia: consultant report to Pertamina dated July, 1996.

P.T. Cakarbuana Perkasa, 1991, Scientific model system panasbumi daerah G. Wilis (Jawa Timur)
dan Karaha (Jawa Barat)- laporan akhir: consultant report to Pertamina dated May, 1991 (incl. vol. 1
report and vol. 2 attachments).

P.T. Serba Multi Sarana, 1988a, Laporan survai kombinasi gravitasi, tahanan-jenis, dan SP, Gunung
Wilis, Jawa Timur: consultant report no. 118/DO. 210/87-S1 submitted to Pertamina, dinas
geothermal.

P.T. Serba Multi Sarana, 1988b, Laporan akhir survai kombinasi gravitasi, tahanan-jenis, dan SP,
Gunung Wilis, Jawa Timur: consultant report no. 118/DO. 210/87-S1 submitted to Pertamina, dinas
geothermal.

15
LIST OF ILLUSTRATIONS

Figures

1. Map of thermal features, drillsites and geophysical data points

2. Detail map of thermal features and drillsites
3. Map of regional geology of Wilis volcanic highland
4. Map of inferred volcanic vents
5. Cross plot of B/Cl ratio vs. Cl, Ngebel thermal waters
6. Map of Bouguer gravity for reduction density 2.30 g/cc
7. Map of Schlumberger apparent resistivity at AB/2 = 1,000 meters
8. Detail map of Schlumberger apparent resistivity at AB/2=1,000 meters
9. Map of elevation of top of conductive layer
10. Resistivity cross-section line A
11. Resistivity cross-section line B
12. Plot of composite temperature profiles, Ngebel slim holes
13. Plot of temperature profiles, WLS-1
14. Plot of temperature profiles, WLS-2
15. Plot of temperature profiles, WLS-3
16. Well summary diagram, WSH-02
17. Plot of pressure surveys, WSH-02
18. Map of elevation of base of near-surface isothermal zone
19. Map of elevation of 140°C isotherm in gradient holes
20. Map of composite geophysical anomalies
21. Map of interpretive resource model- most likely case
22. Map of interpretive resource model- alternative less likely case

Tables

1. Ngebel area thermal fluid chemistry data

16