Drilling Slated to Begin Saturday at Peru's Gas Block 56

LIMA May 17, 2006 (Dow Jones Commodities News via Comtex)

Drilling is slated to begin Saturday at Peru's natural gas Block 56, Pluspetrol Peru Corp.'s general manager Norberto Benito said Tuesday.

"This first well will take around 70 days, and so possibly we will drill three wells this year," Benito said on the sidelines of a contract-signing ceremony.

However, if one final piece of equipment fails to arrive in time, drilling will be pushed back "a few days at the most," he said.

Overall, the consortium developing the block plans to drill six wells. Each well, if all goes smoothly, will cost $17-18 million, Benito said.

"Our aim is that we are producing gas by the first quarter of 2008," he added.

The gas from Block 56 is earmarked for export and will supply Peru LNG Co., which is led by U.S.-based Hunt Oil Co. along with SK Corp. (003600.SE) and Repsol YPF SA (REP). The group plans to export liquefied natural gas to Mexico by 2009.

Carlos del Solar, general manager of Hunt Oil in Peru, said Tuesday that results from the drilling would be available shortly.

Block 56 is operated by Pluspetrol Peru and is being developed by the same group that is running the upstream phase of the Camisea natural gas project that came onstream in mid-2004. That group includes Hunt Oil; SK; Tecpetrol, a unit of Techint (TCNT.YY); Sonatrach (SON.YY); and Repsol (REP).

Block 56 lies near Camisea's block 88 in Peru's southeastern jungle and much of the same infrastructure will be used, although some expansion is necessary.

Officials have said that developing the block will cost about $600 million and involve building a pipeline to the Malvinas plant that currently processes gas from Block 88 as well as expanding the plant's capacity.

Block 56 currently contains 2.75 trillion cubic feet of natural gas reserves, according to the Ministry of Energy and Mines.

Copyright (c) 2006 Dow Jones & Company, Inc.

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