Re Contract

5 Nov 2007 07:00

Pan Andean Resources PLC05 November 2007 PAN ANDEAN RESOURCES PLC Pan Andean is an oil and gas producer and explorer in South America and the Gulf of Mexico Pan Andean Awarded Antorcha Exploration Block in Colombia Highlights O Pan Andean awarded exploration block in Colombia O First operational project in country O Highly prospective block: o Adjacent to two producing fields - on matching geological trend o Studies suggest there could be 1 to 2 billion barrels of oil equivalentin place (Stock Tank Original Oil In Place (STOOIP)) / 100 to 300 millionbarrels of oil equivalent (boe) recoverable reserves O Fast track programme to include localised seismic and the drilling of onewell Pan Andean, the Anglo Irish, AIM listed oil and gas producer (AIM: PRE) ispleased to announce the signing of an exploration and production contract withthe Agencia Nacional de Hydrocarburos (ANH), Colombia's resource managementagency, to explore the 35,000 hectare Antorcha block located in the prolificMiddle Magdalena Basin. Pan Andean holds a 100% interest in the block. The Antorcha block is located up dip of existing heavy oil producing fields, theVelasquez-Palagua field with more than 300 million barrels of oil reserves, andthe Teca-Cocorna-Nare-Jazmin heavy oil field with more than 1,000 millionbarrels of oil in place. The Antorcha block is thought to have the samepetroleum geology as adjacent producers. Preliminary studies suggest significant undiscovered heavy oil potential atshallow depths of less than 2,000 feet. Between 1 and 2 billion barrels of heavyoil in place could exist on the block with 100 to 300 million barrels ofrecoverable reserves, using parameters of nearby fields i.e. porosity 20 - 25%,oil saturation 60%, average net oil thickness of 100 - 200 feet, recovery factorof 10 - 15%. Expected crude quality could be in the range of 10degrees to 20degrees 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 threewells were drilled during the 1980's. Several of these found heavy oil shows,and some were considered as potential producers. However, low oil prices thenprevailing, early technology, the oil gravity, and exploration targets elsewheremeant that the area remained off the radar screen of mainstream explorers. Pan Andean's exploration programme in the Antorcha block will consist ofregional studies, focused seismic acquisition in part of the block, and drillingone shallow well. The programme is expected to be undertaken in 18 months, butgiven the scope of work, excellent above ground conditions, and equipmentavailability for this type of drilling, the programme is likely to be expedited. David Horgan, Managing Director, said: "This is the first concrete result from our pursuit of new opportunities inColombia. Antorcha is located in a highly prospective and much sought after areabeside two producing oilfields. Unlike other petroleum provinces, seismic crews and drilling rigs are available.We plan to expedite our operational programme, drilling an early well andmonetising our asset by establishing a resource base. Pan Andean is building a strong portfolio in South American oil provinces with 3blocks in Peru and now the first of what we hope will be several blocks inColombia. We aim to create a multi basin portfolio with a mix of production,development and exploration, maximising value and potential for shareholders." This announcement has been approved by Ivan Sandrea, Director, Pan Andean. MrSandrea has more than 10 years of international E&P experience. Contacts: Pan AndeanDavid Horgan, Managing Director + 353 87 292 3500John Teeling, Chairman + 353 1 833 2833 College HillPaddy Blewer +44 (0)20 7457 2020Nick Elwes Blue Oar SecuritiesJohn Wakefield +44 (0) 1179 330020Simon Moynagh www.panandeanresources.com About Colombia Colombia is a proven world class hydrocarbons province, with excellentinfrastructure and a modern operating environment. Over 9 billion barrels of oiland 21 trillion cubic feet of gas (TCF) have been discovered in world classbasins. It is estimated that over 35 billion barrels of oil equivalent remain tobe found, much of which may be heavy oil. The country produces more than half amillion barrels of oil per day, has an excellent oil and gas infrastructure andhas been a net oil exporter since the mid 1980's. Impressive annual economic growth for the past few years, combined withsignificant reforms, and improvements in the security situation, make Colombiaone of the most attractive exploration and development plays in the region andworld wide. Foreign investment is strong, particularly in natural resources. Oiland gas legislation is modern and transparent, with royalties ranging from 5% to25% depending on production volumes, incentives for heavy oil developments, andeffective corporate income tax rate of around 35%. Secure title and attractive terms make Colombia an attractive location toexplore for and produce oil. Pan Andean has dedicated a significant amount ofresources since early 2007 to identify attractive opportunities. The Pan Andeanfocus is on high potential shallow depth exploration opportunities (>100 millionbarrels) that can be accessed in non competitive bidding rounds by directnegotiation with the government. However, other opportunities are also beingevaluated. 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