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Peru

Pan Andean entered Peru in July 2006 with the signing of an E&P contract for Lote 114. Since then, we have continued to expand our technical knowledge and pursue additional high potential exploration opportunities in the country. In July 2007, two additional licenses - Lote 131 and 141 - were awarded to Pan Andean in a competitive bidding round. In addition to these three licences, in September 2008, Pan Andean was awarded Lote 161, making Pan Andean the fifth largest acreage holder in onshore Peru.

Lote 114 (Ucayali Basin)

Block 114 is a 1.8 million acre block (72,000 sq km) located in the Central Ucayali basin. In September 2008, Pan Andean completed the farm out of this block to CEPSA of Spain. Ownership of  the block divides up into 30% Pan Andean, 10% CCP (Compania Consultora de Petroleo - a local private Peruvian company) and 60% CEPSA. CEPSA will operate the block. Under the terms of the agreement, Pan Andean is carried through the first exploration well and 50% of the second well in each block.

Work to date has confirmed that Block 114 is an oil-prone play centred on the base Cretaceous formations with additional potential in the pre-Cretaceous formations primarily in the southern part of the block. Twelve significant oil bearing structures have been identified, estimated to contain P50 recoverable resources of up to 1,350 million barrels (430 million barrels on a fully risked basis).

CEPSA have already embarked on an extensive work programme, which includes the acquisition, processing and interpretation of an additional 300km of 2D seismic in the north-eastern part of the block and the projected drilling beginning in 2010 of one or two exploration prospects, accompanied by 3D seismic acquisition on the structures.

Lote 131 (Ucayali Basin)

Located west of Block 114, this block covers an area of approximately 1 million acres (40,000 sq km). In September 2008, CEPSA of Spain farmed into Block 131, earning a 70% operating interest. Pan Andean retains the balance of 30%. Terms of the agreement are similar to those for Block 114; Pan Andean is left with a 30% interest carried 100% through the first exploration well and 50% of the second well.

An initial twelve month exploration phase currently underway includes the reprocessing of 500km of existing seismic data and ongoing geophysical studies. A 1,000km 2D seismic survey planned for 2009-2010, should identify the drilling priorities in Block 131. Drilling of the first exploration well is expected in 2011.

Lote 161 (Ucayali Basin)

Awarded to Pan Andean in September 2008, Block 161 is a 492,000 hectare block in the west of the Ucayali basin. It has oil seeps, 925km of 2D seismic and five wells drilled decades ago. Three prospects have already been identified; Pisqui, Tahwaya and Juanita. Nearby producing fields include the Maquia oil field and the Aguaytia gas-condensate field. The planned work schedule involves reprocessing existing seismic and reinterpreting well logs, shooting additional seismic and drilling at least one exploration well.

Lote 141 (Titicaca Basin)

Block 141 is a frontier project in the Titicaca Basin in southern Peru, south of  the Camisea field, containing a total of 22,000 sq km adjacent to Lake Titicaca, near the Peru-Bolivia border. Block 141 covers 24% of the Titicaca Basin.

Pan Andean has agreed farm in terms on Block 141 with Reliance Industries, India's largest private sector enterprise with businesses in the energy and materials value chain. Reliance Industries' initial interest will be 90% and ultimately between 70% and 90% depending on the economics of the first discovery.

An aeromagnetic and gravimetric survey covering the entire area of Block 141 is currently being tendered and will be completed by the first quarter of 2009. A seismic survey covering a minimum of 300km will be carried out in 2009 and an initial exploratory well is programmed for 2010.