Petrolifera Confirms Activation of Puesto Morales North Waterflood

Petrolifera Petroleum Limited confirmed that its waterflood pressure maintenance project at Puesto Morales North in the Neuquen Basin, Rio Negro Province, onshore Argentina commenced continuous operations on January 11, 2008, following a period of commissioning and line testing which started in late December, 2007.

The purpose of the project is to enhance reservoir pressure in the prolific and high quality Jurassic Sierras Blancas oil-bearing reservoir at Puesto Morales. It is anticipated that there will be a period of approximately six months of water injection before meaningful response will be discernible in overall crude oil production levels and that it will take approximately eighteen months from startup of injection to achieve optimum production response, based on initial simulation studies of the reservoir. The high quality reservoir, characterized by excellent porosities and significant measured permeability, should facilitate excellent transmissibility of fluid and the project is expected to have a material and favorable impact on the ultimate recovery factor for the field.

The first injection stage in the Sierras Blancas formation will occur in 2008 and is expected to reach a total water injection rate of 18,000 barrels of water per day with approximately thirteen injector wells, including new wells and conversions. Future waterflood developments and optimizations will increase the injection rate to the capacity of 25,000 barrels of water per day.

The water injection plant is now operating with initial injection of approximately 5,000 barrels of water per day in four wells, PMN-1025, PMN-1011 and PMN-1037 in the northern part of the field and PMN-1035 in the central portion of the field. Over time, additional injectors will be tied back to the plant to realize the final injection rate of approximately 25,000 barrels of water per day. Fresh water is supplied to Petrolifera's water treatment plant, situated in the northern portion of the field, through a six kilometer ten-inch pipeline from facilities situated near the Casa de Piedra dam on the Rio Colorado River, resulting in the reservoir or embalse in the region.

Petrolifera's Puesto Morales water treatment plant filters the water with a targeted efficiency exceeding 90 percent on particle sizes exceeding five microns. Also, a target of 90 percent efficiency in oxygen removal is anticipated.

The activation of the water injection plant is a significant milestone for Petrolifera. It was constructed against a backdrop of energy and equipment shortages in Argentina and its completion is a credit to the company's operational staff and external advisors and consultants. More importantly, it is anticipated the waterflood will consequentially impact on Petrolifera's light crude oil production in Argentina during 2008 and beyond.