After receiving final approvals from Ecopetrol, the state oil company of Colombia, Petrobank has closed the purchase of AEC Colombia Ltd. (AECC) and assumed the remaining work commitments on two incremental production contracts and three exploration block contracts in the Putumayo and Upper Magdalena basins of Colombia. This acquisition is an ideal fit with the Company's strategy of pursuing high impact international projects that have an existing production base and proven reserves with exploitation and exploration upside.
The Company's activity in Colombia in 2002 will be focused on the Orito incremental production contract in the Putumayo region of Southern Colombia. Petrobank earns incremental production from the Orito Block, which is subject to an initial royalty rate of 5% and initial government participation of 21%. Ecopetrol provides field operations for a fixed fee per barrel of oil produced of approximately U.S.$3.50. Since inception, the field has produced 220 million barrels of oil from an original oil in place currently estimated to be in excess of 1.1 billion barrels. Peak production on the Orito Block reached approximately 70,000 barrels per day in 1969. Since that time, development of the field has been limited. Petrobank plans to exploit the field through additional drilling, completion optimization, artificial lift technology, and through the use of secondary recovery techniques including a potential waterflood. Petrobank has interpreted a recent 3D seismic program that indicates the existence of an undrilled portion of the reservoir between two existing production lobes. Initial drilling will be focused on delineation of this area, along with a potential new extension to the pool, which has been identified on the 3D seismic. We expect to satisfy the remaining $5.0 million phase 1 work commitment by drilling up to three wells by the end of 2002 at an estimated total cost of US$9 million. Petrobank then has the option to proceed to a second development stage, which would entail spending an additional US$27 million through drilling an estimated 11 wells in 2003. Petrobank is targeting initial production rates on new wells between 300 and 1,000 barrels per day. The field has an extensive network of infrastructure, which should support significant incremental production without the need for immediate facilities construction. In the Upper Magdalena basin the Company has also acquired the Neiva Block, which is subject to an incremental production contract similar to the Orito contract, except that the initial government participation is 31% of incremental production. The field is currently producing approximately 4,000 barrels of oil per day from 60 wells. The Neiva field has produced 51 million barrels since inception from an original oil in place estimated to be in excess of 210 million barrels. Remaining work commitments on this block are approximately US$11.0 million. In 2002, Petrobank plans to spend US$1.0 to 2.0 million at Neiva, primarily on well recompletions.
In addition to the Orito and Neiva incremental production contracts, the Company has acquired three exploration blocks in the Putumayo basin. Petrobank earns its interest on these blocks by completing initial work plans that include shooting seismic and/or drilling exploratory wells. The remaining exploration commitments total approximately US$8.5 million, which we anticipate will be satisfied over the next three years. In 2002, we plan to reprocess seismic data at an estimated cost of US$0.3 million.
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