Colombia Approves 2 New Oil E&P, 2 Technical Contracts

BOGOTA Sep 4, 2006 (Dow Jones Newswires)

Colombia's National Hydrocarbon Agency, ANH, signed two new exploration and production oil contracts in August as well as two technical contracts representing $7.5 million in investment, as it seeks to encourage the discovery of reserves, the agency said Monday.

Canadian Petrominerales, the Colombian unit of Canadian Petrobank Energy & Resources Ltd. (PBG.T), secured the Mapache area, about 107,705 acres located in the Llanos foothills, near the Venezuelan border.

Petrominerales recently said it's committed to drill two exploration wells scheduled for the first quarter of 2008.

The Colombian company Sogomi Energy won a concession to explore and produce an area called Nashira, also located in the Llanos foothills.

ANH also signed two technical contracts, a step before formal exploration, with Canadian Nexen (NXY) and Colombian Fenix Oil & Gas S.A. to carry out preliminary exploration studies in the Magdalena river basin.

Separately, U.S based Hupecol and Colombian Petrosantander, each drilled a well in the Magdalena river basin in August.

The Alvaro Uribe administration has signed so far this year 24 exploration contracts and 12 preliminary contracts.

In total, the government hopes companies will drill 40 oil wells this year. ANH also hopes to sign 30 exploration and production contracts in 2006.

The Colombian government said in November the country must sign 30 oil-exploration contracts and drill 60 oil wells every year until 2020 to reverse a decline in oil output and reserves as well as to maintain its self-sufficiency in the commodity.

Colombia, Latin America's fifth-largest oil exporter, must discover at least 10 productive oil wells per year to increase average oil production to 700,000 barrels per day from 519,350 b/d in 2005, according to ANH's director Armando Zamora.

Vast territories, potentially rich in hydrocarbons, remain unexplored in Colombia, which shares many of the geological features of its oil-rich neighbor, Venezuela. The Llanos and Magdalena basins, in particular, may have significant reserves.

Although analysts warn that new reserves may not be easy to find, a number of oil majors are dusting off seismic projects thanks to government efforts to make the country a more appealing destination.

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