The new Luna Llena Contract, one of six contracts Global now holds in Colombia, covers 369,000 acres within the approximate 2.1 million acre Valle Lunar TEA, which is located in the established Llanos Basin of eastern Colombia. The Valle Lunar TEA, signed on May 2005, grants Global the exclusive option to convert any of the acreage into a contract or contracts prior to or at the TEA's conclusion in October 2006.
"The early conversion of the Luna Llena Contract reflects Global's desire to accelerate its work program on this selected area due to management's belief that the opportunity to develop substantial medium heavy oil reserve potential is significant," said Stephen Voss, Global's Managing Director.
"Two international oil companies drilled a number of shallow wells in the 1980s within Luna Llena to a depth of approximately 3,000 feet which delineated what is now known to be the El Miedo field. Oil production tests were successful but the opportunity was deemed non-commercial at the time due to low oil prices," said Voss.
Since Global signed the Valle Lunar TEA, the company has conducted Landsat analysis of the acreage, which yielded a considerable amount of surface data, particularly within the Luna Llena area, that can be utilized in subsurface interpretation. In addition, the Luna Llena acreage contains the identified El Miedo field. The El Miedo field has substantial well tests and subsurface geologic control that was acquired by two international oil companies in the 1980s from an extensive drilling effort conducted by these oil companies. Oil production tests were successful at that time. Global has already completed engineering and geologic studies on the El Miedo field.
Global will own 100% of the Luna Llena Contract subject only to an initial 8% royalty, with the size of the royalty to be determined by future production levels. The Contract duration is 30 years divided into an initial six-year exploration phase and a 24 year exploitation and production phase. Under the terms of the Luna Llena Contract, Global must, within 18 months, acquire 165 kilometers of 2D seismic, reprocess 500 kilometers of existing seismic, re-enter and test one existing well and drill two exploratory wells which cover the total geologic column. Global can then elect, if it so wishes, to proceed to phase two which also covers 18 months and requires re-entering another existing well or drilling another exploratory well. Phases three to five, all optional, are each 12 months and require the drilling of an exploratory well in each phase.
Global will continue to hold the remaining Valle Lunar TEA acreage and conduct further geologic analysis and geophysical tests over the next several months, fulfilling all the associated work obligations, with a goal of potentially contracting more of the acreage. Global is finalizing its plans for new drilling in the El Miedo field in the second half of 2006.
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