Ecopetrol, Chevron to drill 3 new wells in La Guajira

Wednesday, January 11, 2006

Colombia's state oil company Ecopetrol and US oil company Chevron (NYSE: CVX) plan to invest US$175mn to drill three new wells on the Chuchupa field in northernmost La Guajira department in the next three months, Colombia's mines and energy ministry said in a statement.

These new wells could increase natural gas production by 250 million cubic feet a day (Mf3/d) as early as the second half of 2006, the statement said.

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The new operations were made possible by the extension of Chevron's association contract with Ecopetrol signed in December 2003.

The contract covers the Chuchupa offshore field and the Ballena onshore field, which together produce about 500Mf3/d of gas.

The extension agreement is for the commercial life of the fields and provides the framework for further investment to develop and produce the remaining natural gas reserves in the contract area.

Under the terms of the original Guajira area A contract signed in 1974, Chevron and Ecopetrol each own a 50% interest and Ecopetrol would have assumed 100% rights to Chevron's installations and production from December 31, 2004.

Under the new extended contract, Chevron reduced its participation to 43% in exchange for financial and technical benefits to Ecopetrol, which will hold the remaining 57% interest.

La Guajira is the center of Colombian gas production and supplies more than 70% of domestic gas demand, with the remainder coming from UK oil firm BP's operations in Casanare department.