Emerald Encounters Heavy Oil at Ombu Block in Colombia

Emerald Energy reported that drilling of the Capella-1 exploration well, in the Ombu block in Colombia, commenced on July 10 and reached its total depth of 3,802 feet on July 30. Hydrocarbon shows were encountered while drilling the target Mirador formation and wireline logging indicated the presence of 189 feet of potential hydrocarbon bearing intervals.

After the wireline logging evaluation, the lower non-prospective section of the borehole was isolated with a cement plug set at 3,420 feet and casing was run to a depth of 3,303 feet leaving the middle 117 feet of potential hydrocarbon pay, believed to be of lower porosity and permeability, uncased in open hole and the upper 72 feet of potential hydrocarbon pay in mainly higher porosity sandstones behind casing.

Flow testing of the open-hole interval has been achieved using a progressive cavity mechanical pump. During this testing over a period of 6 days, the production stabilised at a rate of approximately 155 barrels per day of 10.5 degree API gravity oil with a water cut of approximately 15% which may have been the return of drilling fluids lost to the formation while drilling. The lower open hole section was subsequently isolated with a retrievable bridge plug so that it may be re-entered later.

The upper cased zone was then perforated and flow tested, also using a progressive cavity mechanical pump, operating at a reduced rate to avoid the potential inflow of solids from the higher porosity sandstones. During this testing over a period of 4 days, the production stabilized at a rate of approximately 85 barrels per day of 10.5 degree API gravity oil with only traces of water.

On completion of this initial testing the rig will be demobilized from the well site. It is then planned to conduct longer term production testing of the well for a period of up to six months which may involve the use of alternative pump configurations and cyclic steam injection.

Under the terms of the farmout agreement announced on July 14, 2008, the cost of drilling, evaluating, and testing the Capella-1 well, including the longer term production testing, is being paid by Canacol Energy Inc. to earn a 10% interest in the Ombu block. In total, Canacol may earn up to a 30% interest in the Ombu block, subject to the approval of the National Hydrocarbon Agency of Colombia ('ANH'), in three stages by paying 100% of the cost of up to 15 wells plus 2D and 3D seismic surveys.

The Company has notified the ANH of the results to date of this discovery. Following these encouraging results from the first well on this potentially large structure, the Company has decided to drill the Capella-2 well approximately 1.3 kilometers from the Capella-1 discovery well. Drilling of the Capella-2 well will commence once the rig has been mobilized to the location and the well is expected to take up to three months to drill, evaluate and flow test.

Emeralds' Chief Executive Officer, Angus MacAskill, said, “We are pleased with the results of the Capella-1 well demonstrating the presence of oil in this material structure and providing an encouraging total cold flow production rate of approximately 240 barrels of oil per day from the tested zones in this vertical well. We are optimistic that these results, together with the data expected from the Capella-2 well, will support the commercial development of this conventional heavy oil discovery.”