Peru inks 13 exploration agreements with IOCs

Peru’s state-owned Perupetro, recovering from earlier scandals connected with the awarding of exploration licenses, has signed 13 new contracts valued at $650 million with international oil companies.

“With these 13 contracts we now have in effect a total of 92 oil contracts,” a situation that shows “the confidence” that investors have in the country, said Peru’s President Alan Garcia during the signing ceremony at Government Palace in Lima.

Recently appointed Energy and Mines Minister Pedro Sanchez expressed optimism over the awards, saying they would help transform the country’s oil and gas industry. “For many years, Peru has been a net importer,” he said. “We [now] will become net exporters.”

The awards went to Faulkner Suits Exploration Inc., Block 27; Cepsa, Block 130; Golden Oil Corp., Block 132A/132B; Petrolifera Petroleum Ltd., Block 133; KEI Pty., Block 144; Olympic Peru Inc., Block 145; and Emerald Energy PLC, Block 163.

Other awards went to Grupo Petrolero Suramericano SAC, Block 156; PVEP Peru, Block 162; Talisman Energy Inc. and Colombian Ecopetrol SA, Block 158; Cia. Consultora de Petroleo SA and South Korea’s Kedcom Co. Ltd., Block 160; and Pan Andean Resources PLC, Block 161.

A four-company consortium comprised of Pluspetrol, Peru’s state oil company Petroperu, India’s Reliance Exploration & Production DMCC, and Chinese-owned Sapet Development Peru Inc. (Sapet Peru) was awarded Block 155.

Under terms of the new contracts, the companies will drill 35 wells during the exploration phase. If commercial volumes of hydrocarbons are discovered, the average royalty rate to be paid to the government will be more than 30%.

Meanwhile, Peruvian officials said an auction for an additional 12 lots for oil and gas will be held in July.

“I’d like to take this opportunity…to announce the start of the 2009 selection process, which will officially begin in July and include 12 or 13 lots that may contain petroleum,” said Perupetro Pres. Daniel Saba.

The auction will be Peru’s first since last year, when several top government officials were fired or forced to resign after being accused of steering concessions to favored bidders.

At the time, Peru’s former mines and energy minister, Juan Valdivia, resigned, while Perupetro board member Alberto Quimper and Perupetro Pres. Cesar Gutierrez were fired.

The scandal was exposed when an audio tape surfaced on an investigative television news show that included a conversation between Quimper and Romulo Leon, a prominent member of President Garcia’s APRA party, in which they apparently agreed to favor Discover Petroleum of Norway in a round of energy auctions.

The Norwegian company, which partnered with Petroperu, was later awarded five blocks: four of them off the country’s central Pacific coast and the fifth onshore near Peru’s borders with Brazil and Bolivia.

Peru’s justice ministry said it would investigate the banking records of the Peruvian executives and suspend the contracts awarded to Discover.

Blue Energy Ltd., Brisbane, agreed to pay for two successful exploration wells that tested the potential of the Cretaceous Burrum coal measures on ATP 613P in Australia’s Maryborough basin.

Blue Energy will become operator and conduct further exploration to earn a 75% interest from Magellan Petroleum (Eastern) Pty. Ltd. in a farmout on ATPs 613P, 674P, and 733P, which cover the basin’s entire coal area along Hervey Bay in eastern Queensland.

Gas in place on the three tenements is estimated at 372 bcf.

Oil Search (PNG) Ltd. took a farmout from Eaglewood Energy Inc. to earn an interest in PPL 260 in the Papuan basin fold belt in Papua New Guinea.

Oil Search will pay Eaglewood $1.5 million and complete the required seismic program at its sole cost by June 30, 2009, to earn a 10% interest in the license. Oil Search and Eaglewood will shoot $1.6 million in further seismic at a cost of $800,000 to Eaglewood.

After all seismic is completed, Oil Search will have 3 months to elect to earn a further 60% interest by paying 90% of the cost to drill an exploration well on trend with giant Hides and Juha gas-condensate fields.

Carbon dioxide response at a pilot in Milnesand field in New Mexico is close to proving the applicability of tertiary oil recovery to the entire 6,800-acre field, said Enhanced Oil Resources Inc., Houston. The company has injected 80 MMcf of the gas since Sept. 1, 2008, and pilot production attributed to the technique is 33-38 b/d of oil from the Permian San Andres formation.

Injection is to switch to water-alternating-gas around July 1.

Consulting engineers estimated that the company could recover as much as 53 million bbl of oil from Milnesand and nearby Chaveroo fields in Roosevelt and Chaves counties. Milnesand is the first field to be flooded in New Mexico, whereas several San Andres floods are operating on the Texas side of the Permian basin.

Newfield Exploration Co., Houston, has been slowing its pace of Woodford shale completions in Oklahoma due to low gas prices.

Gross production is 240 MMcfd of gas, and the company is operating 11 rigs in the field, six of which roll off term contract in 2009.

“The timing of rig contract expirations and the fact that more than 90% of the company’s 165,000 net acres now held by production provide Newfield with operational flexibility in the second half of 2009,” Newfield said.

Laterals Newfield drills in the play are expected to average more than 5,000 ft in 2009.

Oil sales from Monument Butte field in the Uinta basin are averaging 19,000 b/d, up from 17,000 b/d at the end of 2008, said Newfield Exploration Co., Houston.

The increased sales reflect improved demand for black wax crude, the company said. Differentials have narrowed to about $12/bbl below West Texas Intermediate crude, including transportation expense.

Newfield continues to run three rigs in the area, which covers 180,000 gross acres. Substantially all of the acreage is held by production.