El Paso to Invest US$90mn in E&P in 2006

US energy company El Paso (NYSE: EP) plans to invest US$90mn to develop its oil and gas portfolio in Brazil this year, up from US$50mn-60mn in 2005, company Brazil E&P vice-president Mike Hoffman announced during the Latin Upstream seminar in Rio de Janeiro on Friday.

El Paso plans to drill seven exploration wells in 2006 in five of the 15 exploration concessions in which it has interests in the country, Hoffman said.

The company will also drill two wells to develop production further at the Pescada and Arabiana fields in the Camamu Almada basin in northeastern Brazil.

Part of the investment will go to start production at the Pinauna gas field in the northeastern region by the fourth quarter of 2007, Hoffman said.

Of the total US$90mn planned investment, the company will spend 45% on exploration, 27% on production and 20% on development.

"Our portfolio gives us a pretty solid position in Brazil," he said. "Our aim is to double production contribution in the next three years."

The company currently produces 35,000 barrels of oil a day from its stakes in the Pescada and Arabiana fields operated by Brazil's federal energy company Petrobras (NYSE: PBR).

The announcement comes as the company concludes a worldwide restructuring of its assets through the sale of power businesses in most countries where El Paso operates.

"El Paso is a new company," Hoffman said. "We are getting to the point where we have consolidated a lot of our debt." El Paso sold control of its 928MW Macae gas-fired power plant to Petrobras last year and its 470MW Araucaria to local power firm Copel in March. Although El Paso still controls six power plants in the country's northern region and has interests in three pipeline projects, the company will now focus on oil and gas in Brazil.

El Paso has concessions covering 430,000 acres in Brazil, which could be expanded in November if it bids for new exploration concessions the government plans to offer in the eighth exploration licensing round.

"We will look at the blocks on offer and decide whether to bid," said Hoffman.

El Paso currently has interests in two production fields, five development blocks and eight exploration blocks.

Total reserves in the country are estimated at 209 million barrels of oil equivalent (Mboe), of which 42Mboe are proven reserves, Hoffman said.

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