Pan Andean Formalizes E&P Contract for Block 161 in Peru

Pan Andean has formally signed the contract on Exploration & Development Block 161 in Peru, the award of which was announced on September 16, 2008.

Block 161 is located in the Sub-Andean foothills in the prospective Ucayali basin of central Peru, close to Blocks 114 and 131 in which Pan Andean already holds a 30% carried interest. The Ucayali basin includes the world-class Camisea discovery of 14 tcf of gas and c.600 mmb of condensate.

Pan Andean was awarded this block in the 2008 bid round. The contract was signed on 16 April 2009, in the company of H.E. Mr. Alan Garcia, President of Peru. Block 161 is a large concession composed of an initial area of 491,784 hectares. There exists 925km of 2d seismic data, which have been re-processed to a high standard.

Block 161 is adjacent to two producing fields. The Maquia field, to the north, has produced over 8 million barrels of quality crude oil of 37 degrees API from the Cretaceous Formation. The proven reserves are 20 million barrels. The Aguaytía field, located to the south of Block 161, is producing 2,525 barrels of condensate and 39 million cubic feet of gas daily.

Block 161 has a well-defined petroleum system, with established Jurassic and Permo-Carboniferous source rock, traps, reservoirs and seals. These are believed to be similar to the Camisea field. Pan Andean is targeting both gas and oil plays.

Seismic analysis shows major anticlines. The Sub-Andean play in Block 161 shows 5 possible prospects. The work program includes geological & geophysical evaluation in year 1, acquisition of 300km of seismic in year 2 and drilling of an exploration well to at least 3,500m in years 3 & 5.

David Horgan, Managing Director of Pan Andean Resources, commented, "With the signature of the Block 161 contract, Pan Andean has confirmed its position as a major acreage holder in the prospective Ucayali basin. Together with our operating partner CEPSA, the investment programme for our nearby Blocks 114 and 131 is proceeding on schedule.

"In his address, President Garcia highlighted Peru's political, social & economic stability as underpinning continued exploration success and development of hydrocarbon reserves. Notwithstanding international economic challenges, the signature of another 13 exploration contracts, totalling 92 operative agreements, confirms Peru's rare combination of prospective geology and attractive fiscal terms."