Pacific Stratus Planning La Creciente NatGas Auction



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Toronto-based Pacific Stratus Energy (TSX: PSE) is planning to auction the first natural gas production from its La Creciente block in Colombia's lower Magdalena valley, a company spokesperson told investors and analysts in a conference call.

The auction will be held at a hotel in Bogotá in September pending final approval from state hydrocarbons regulator ANH.

Pacific Stratus will sell the first 40Mf3/d (1.12Mm3/d) of production expected to come online in October, but 15 companies have already expressed interest for more than 240Mf3/d of natural gas.

Pacific Stratus plans to have 60Mf3/d available for sale by March 2008 and proven and probable reserves could guarantee sales for 24 years. One prospect at La Creciente, for example, could contain 800Bf3 in reserves, according to the spokesperson.

"We don't have certain numbers [regarding the price of the natural gas], but demand exceeds our early availability fivefold," the spokesperson said. "We will be sure to extract the maximum the market will pay."

The auction will represent the first hydrocarbons sold in Colombia produced under new ANH royalty agreements that preclude no additional state participation.

ANH is working closely with Pacific Stratus on the auction to learn what the market will pay for Colombian natural gas, the spokesperson said.

DISTRIBUTION, TRANSPORT

Pacific Stratus expects to sell natural gas to domestic distributors in Colombia and will also use a pipeline being constructed to the port city of Cartagena for international export opportunities.

"A lot of Colombian powers generators have had to switch to other liquid fuels because they cannot get the gas so we are confident we could sell all our gas production on the local market," the spokesperson said."

"The reason we are looking to export is because we are also looking to get higher prices internationally and towards the end of the year, the pipeline to Venezuela is going to start begin exporting 150,000 cubic feet to Venezuela so regardless, we see a huge shortfall here in Colombia," the spokesperson said.

The pipeline to Cartagena will allow Pacific Stratus to export the gas, and the company has been approached about developing possible LNG projects, the spokesperson said.

"There is a huge demand for gas in the Caribbean. We don't just want to tie into the local market but also to have access to the export market," the spokesperson said.

Demand comes from the coast, the spokesperson said.

"Existing suppliers are not delivering their contractual amounts to existing clients. The Cartagena refinery is being expanded and will be a huge consumer of gas so Cartagena is the logical place to go," the spokesperson continued.

Pacific Stratus has a current net production of 2,200b/d and offices in Caracas, Toronto and Bogotá.

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