International Oil Companies Contract to Start Exploration in Magallanes

The international oil companies which last October were awarded blocks in a tender process for exploring for hydrocarbons in Magallanes, signed their respective Special Petroleum Operation Contracts (CEOP) with the state of Chile at a ceremony headed by President Michelle Bachelet in Punta Arenas.

A CEOP is a special petroleum operation contract that the state of Chile, represented by the Ministry of Mining, signs with a company or consortium of companies for the exploration, exploitation and benefit of hydrocarbon deposits.

This mechanism is contemplated in the Chilean constitution to promote the participation of private-sector companies in the exploration and production of hydrocarbons in Chile. These may be awarded by direct negotiation or tender, the latter being the case of the blocks making up the present process.

Present at the ceremony were the minister of mining, Santiago Gonzalez, defense, Jose Goni; the under-secretary for mining, Veronica Baraona, the chief executive officer of ENAP, Enrique Davila, and authorities of Chile's 12th Region of Magallanes and the Chilean Antarctic.

Representatives of the following companies also took part: Apache Corporation (Canada), Pan American Energy LLC (United States), Greymouth Petroleum Holding Ltd. (New Zealand) and the IPR-Manas consortium (United States-Switzerland). asi como el Gerente General de ENAP, Enrique Davila y autoridades de la Duodecima Region de Magallanes y Antartica Chilena.

The international oil companies and ENAP committed themselves to investing a total of US$ 267 million over a period of between three and seven years in activities that include seismic and drilling operations, plus the contracting of services, transport, infrastructure and environmental consultancy. "These activities will have a strong impact on the regional economy and provide new opportunities for workers and the suppliers of services in Magallanes", said the chief executive of ENAP, Enrique Davila.

The blocks awarded will be operated by the winning companies or consortia: Tranquilo (IPR-Manas), Russfin (Apache), Brótula, Isla Magdalena and Porvenir (the three awarded to Greymouth). In the remaining blocks, the winning companies will participate jointly with ENAP, with 50%: Coiron (Pan American Energy), Caupolican (Greymouth) and Lenga (Apache).

The companies have six months to start the promised activities from the date of signing the contracts.

The contracts are divided into two phases: exploration and production. While the exploration phase has a period of up to seven years (divided into three periods of 36, 24 and 24 months), the production phase may not exceed 25 years which will begin once a field is declared to be commercially exploitable. The passing from an exploratory period to another depends on the contractor's decision.

Blocks awarded

The international companies will have all the exploration and production rights in the blocks Tranquilo, Russfin, Porvenir, Brotula and Isla Magdalena.

--Tranquilo: Awarded to the IPR-Manas consortium which committed to a minimum total investment of US$ 33.2 million in the three exploration periods.

--Russfin: Awarded to Apache which committed to a minimum total investment of US$ 23.4 million in the three exploration periods.

--Porvenir: Awarded to Greymouth which committed to a minimum total investment of US$ 11.3 million in the three exploration periods.

--Brotula: Awarded to Greymouth which committed to a minimum total investment of US$ 48.6 million in the three exploration periods.

--Isla Magdalena: Awarded to Greymouth which committed to a minimum total investment of US$ 13.6 million in the three exploration periods.

In the Coiron, Caupolican and Lenga blocks, the foreign companies will participate jointly with ENAP and will act as the operator in each one:

--Coiron: Awarded to Pan American Energy LLC which will invest a minimum of US$ 34 million in the three exploration periods, covering the whole of ENAP's participation.

--Caupolican: Awarded to Greymouth which will invest a minimum of US$ 33.9 million in the three exploration periods, covering 28% of ENAP's participation.

--Lenga: Awarded to Apache which will invest a minimum of US$ 24.9 million in the three exploration periods, covering the whole of ENAP's participation.

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