During January 2008, Karoon signed a farm-in agreement to acquire a 20% participating interest in Block Z-38, an offshore block  of 4,750 square kilometres located in the Tumbes Basin, 10 kilometres from the northwest coast of Peru. This region has  historically been very productive with the first discoveries late in the 1800s, however, much of the offshore portion of the basin  remains relatively underexplored. The Talara Basin, to the south of the block continues to produce oil and gas and the Talara Basin  has to date produced more than 1.6 billion barrels of oil.  In October 2009, Karoon was approved by the regulator as Operator of the block and negotiated to increase its participating  interest in Block Z-38 to 75%. This new participating equity has received further regulatory approval and planning is now underway  for a two well drilling campaign to satisfy the third year work commitments. Interpretation of the new 1,500 square kilometre 3D seismic program was completed during the financial year, fulfilling the  second year work program commitments. Detailed prospect oriented interpretation indicates the presence of fifteen prospects  and leads. The new prospects vary significantly in size with each of the four largest having an estimate of mean unrisked  prospective resource of over 250 million barrels of oil plus significant volumes of gas.  Block Z-38 is interpreted to contain thicker sections of Miocene rocks, of which the two main regional reservoir depositional  cycles are interpreted to be well developed. These depositional cycles are in the Zoritos and Tumbes sequences. Reservoirs at  both these levels in Block Z-38 are interpreted to be turbidite sands, likely to offer better reservoir quality than the sands seen in  the Corvina field which are poorer quality, poorly sorted deltaic sands.  Karoon Gas Australia Ltd  Annual Report 2011 12 Organos Pena Negra Lobitos Carpitas Karoon  Block Z-38 Zorritos Tumbes Machala Malcas Albacora Corvina Amistad 50km 0 10 20 30 40 3D Peru Ecuador Colombia Brazil 171Bcf 130 MW  power plant 131 MW  power plant Karoon operated block 75% equity Tumbes Basin Oil  and Gas Fields: P1: 37.4mmbl P2: 51.8mmbl P3: 36.9mmbl Liquid hydrocarbon indications  in seabed cores comparable  with oils in existing fields. Proven  hydrocarbon system in Z-38. Talara Basin Oil and  Gas Fields: 1680mmbl + 340Bcf  Peru (by hydrocarbon type) Oil and Gas Gas Onshore Peru Onshore Ecuador Karoon Tumbes Basin Acreage Karoon Operated Z-38 Peru Block Z-38 2010-2011 OPERATIOnS COnTInUEd fOR THE fInAnCIAL YEAR EndEd 30 jUnE 2011 3D Seismic Interpretation