Under the terms of the agreement, $US2 million will be provided to the SW1A Joint Venture partners to fund the drilling of up to four development wells to exploit the oil producing F Sandstone.

As for the funding arrangement, the JV partners will pay a percentage of the sales proceeds of oil produced from the F Sandstone. The percentage decreases once Gemini has received the $US2 million, Carnarvon Petroleum said.

Carnarvon said the objective of the development is to fully exploit the proven recoverable reserves of some five million barrels of oil already discovered in the F Sandstone as well as appraise its further potential.

Carnarvon added it expects to spud the four production wells by the third quarter of this year and is confident of initial production rates in excess of 1,000 bopd with the figure raising to 2,500 bopd by next year.

Apart from new projects elsewhere in Thailand or the region, this funding should remove the need for any further capital raising by Carnarvon, the company said.