The block covers an area of 35,700 hectares and lies immediately north of, and on trend with, the Valdivia Oil Field, which is currently producing in excess of 3,000 barrels of oil per day. The approved work program for the block over the next 12 months is to re-process and re-interpret the existing seismic lines in the block as well as to acquire 100 km of new seismic data. This seismic coverage is designed to locate a Valdivia Field look-alike which, if present, would be drilled in the second year.
The partners in the joint venture are Expet S.A. and Consultoria Colombiana S.A. Chaco will fund 100% of the seismic program and the first exploration well in order to retain a 54% equity interest. The cost of the seismic program is estimated at approximately US $1million.
Chairman Jon Pither commented 'We are very pleased that our group has been awarded this block which, although an exploration play, has the potential of locating one or more Valdivia type fields on the same productive trend. This award, coming so soon after the announcement of the Chaco farm-in to the Alea Field Development Project, further cements our position as a serious player in the exploration for, and development of, new fields in the exciting sub-Andean basins of Colombia.' Chaco Resources Plc is the successor company to Gold Mines of Sardinia Plc. In 2004, the Company changed its name and its strategy to one of pursuing hydrocarbon exploration and development opportunities in South America, focusing initially on Paraguay. Two local companies, Amerisur SA and Bohemia SA, were acquired for shares whereby Chaco obtained preliminary rights to a total of approximately 4.7 million hectares held under three applications. Two of the three applications covering approximately 2.3 million hectares were subsequently granted as Exploration and Production concessions and the third is still in process. For various reasons, the country has seen comparatively little exploration activity to date, but it is of interest due to commercial extraction of hydrocarbons having been made in adjoining countries from hydrocarbon basins which extend into Paraguay. All the historical seismic data relative to the applications was purchased at the time of the acquisitions and is currently being re-processed using modern computers and analytical programs. On completion of this first phase, the Company plans to review its strategic options in terms of doing further seismic work and/or initiating a drilling program. The Company's stated intention is to bring in farm-in partners for this second phase.
Chaco was subsequently introduced to opportunities in Colombia, where a fundamental change in the fiscal laws and an overhaul of the state's management of hydrocarbon exploration and production permits created a very favorable investment environment. Chaco teamed up with strategic joint-venture partners who have many years of experience operating in Colombia and through whom it has been seeking to participate in exploration and production (E&P) concessions. On 3 October 2005, the Company announced a joint venture with Repsol YPF SA to exploit the Alea field in the Putumayo.
The Puerto Lopez Oeste block was the second of three applications submitted. The third is highly competitive and the Company is keeping details confidential at this point. Under current legislation, where an entity holds a Technical Evaluation Area permit ('TEA'), in the event that another party submits a development budget for all or part of that area, the TEA holder must match the budget within 30 days or lose its rights over the block(s) in question. If the TEA holder does not contest the third party's application, the hydrocarbons ministry (ANH) will consider whether the third party meets its criteria for a suitable applicant. The ANH has up to 60 days to deliver its verdict. It is in this context that the Company has been submitting development budgets for blocks in existing TEA's through its partners.
The Alea Block development budget was matched by Repsol, but they agreed to the Company's farm-in proposal. In contrast, the Company's Puerto Lopez Oeste application was not contested by the TEA-holder.
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