Pan Andean Takes Stake in Antorcha Exploration Block in Colombia

Pan Andean has signed an exploration and production contract with the Agencia Nacional de Hydrocarburos, Colombia's resource management agency, to explore the 35,000 hectare Antorcha block located in the prolific Middle Magdalena Basin. Pan Andean holds a 100% interest in the block.

The Antorcha block is located up dip of existing heavy oil producing fields, the Velasquez-Palagua field with more than 300 million barrels of oil reserves, and the Teca-Cocorna-Nare-Jazmin heavy oil field with more than 1,000 million barrels of oil in place. The Antorcha block is thought to have the same petroleum geology as adjacent producers.

Preliminary studies suggest significant undiscovered heavy oil potential at shallow depths of less than 2,000 feet. Between 1 and 2 billion barrels of heavy oil in place could exist on the block with 100 to 300 million barrels of recoverable reserves, using parameters of nearby fields i.e. porosity 20 – 25%, oil saturation 60%, average net oil thickness of 100 – 200 feet, recovery factor of 10 - 15%. Expected crude quality could be in the range of 10° to 20° API.

The block has little seismic coverage, with only the tails of 5 seismic lines. Nine stratigraphic wells were drilled by Texaco in the 1950's and another three wells were drilled during the 1980's. Several of these found heavy oil shows, and some were considered as potential producers. However, low oil prices then prevailing, early technology, the oil gravity, and exploration targets elsewhere meant that the area remained off the radar screen of mainstream explorers.

Pan Andean's exploration program in the Antorcha block will consist of regional studies, focused seismic acquisition in part of the block, and drilling one shallow well. The program is expected to be undertaken in 18 months, but given the scope of work, excellent above ground conditions, and equipment availability for this type of drilling, the program is likely to be expedited.

David Horgan, Managing Director, said:

"This is the first concrete result from our pursuit of new opportunities in Colombia. Antorcha is located in a highly prospective and much sought after area beside two producing oilfields.

Unlike other petroleum provinces, seismic crews and drilling rigs are available. We plan to expedite our operational program, drilling an early well and monetising our asset by establishing a resource base.

Pan Andean is building a strong portfolio in South American oil provinces with 3 blocks in Peru and now the first of what we hope will be several blocks in Colombia. We aim to create a multi basin portfolio with a mix of production, development and exploration, maximising value and potential for shareholders."