(SeekingAlpha, 18.Mar.2019) — On March 13, 2019, GeoPark Limitedentered the Ecuador upstream by winning the Espejo and Perico blocks in the Oriente Basin in the Intracampos Bid Round (Fig. 1).
GeoPark formed a 50:50 consortium with Frontera Energy Corporation in the participation of the bid round. The final award is contingent upon regulatory approvals and the execution of the contracts, expected for 2Q2019.
Fig. 1. A map showing the Intracampos Licensing Round blocks, Ecuador, with existing oil fields shown in green. Source.
On a separate note, Gran Tierra (GTE) was awarded three blocks, i.e., Charapa and Chanangue, across the Colombia-Ecuador border from its numerous holdings in the Putumayo Basin and the Iguana Block (see here). Other bidders include Russia’s state-controlled Zarubezhneft, Uruguay’s Petrobell, Flamingo operating off of the U.S., and Ecuador’s Petrolamerec.
The Oriente Basin
The Oriente basin is one of the most prolific petroleum provinces in Latin America, currently producing more than 500,000 bo/d. It has access to infrastructure with spare capacity and well-developed service industry.
The Oriente Basin extends into Colombia as the Putumayo Basin (Fig. 2).
The Espejo and Perico, as well as the other blocks are covered with 3D seismic and are adjacent to multiple discoveries and producing fields (Fig. 1).
Fig. 2. The Oriente Basin in Ecuador.
The Perico block consists of 7,170 ha (17,700 acres), 100% covered with 3D seismic data (Fig. 3).
The exploration work commitments include the drilling of four wells, 72 km2 of 3D seismic reprocessing and 72 km2 of magnetometry and gravimetry, and a surface geochemical program.
Fig. 3. The Perico Block.
The Espejo block consists of 6,334 ha (15,650 acres). The exploration work commitments include the drilling of four wells, a 3D seismic acquisition program of 55 km2, some 74 km2 of 3D seismic reprocessing, 63 km2 of magnetometry and gravimetry, and a surface geochemical program (Fig. 4).
Fig. 4. The Espejo Block.
The blocks offer low-risk exploration opportunities. From existing 3D seismic and other relevant data, more than five multilayer, ready-to-drill light oil prospects and leads have been identified. Ongoing geoscience evaluation and field operations are expected to start in late 2019 or early 2020.
The bid round
The Intracampos Bid Round was carried out on March 12, 2019, in Quito, Ecuador. It included eight oil blocks, in the Amazonian Sucumbios Province, i.e., Araza Este, Chanangue, Iguana, Perico, Espejo, Panayacu Norte, Charapa, and Sahino (Fig. 1). The bid round is thought to offer terms attractive to international oil companies (see here) (Fig. 5).
Fig. 5. The Intracampos bid round.
These blocks are all located among existing oil fields and hence offer low-risk exploration opportunities, all being conventional play and collectively having a prospect of containing 854 MMbbl of 23-32o API grade oil, according to the Energy Ministry of Ecuador (see here) (Fig. 1).
The Ecuador government offered participation contracts to share operatorship of the fields with private companies under a model based on production increases, taxes, and oil prices. Under such a model, the state retains a minimum 50% stake in all the ventures (Fig. 6).
Fig. 6. The production sharing scheme.
The Perico and Espejo blocks are under an initial four-year exploration period, with the option to extend the exploration period by an additional two years.
GeoPark and Frontera are committed to a minimum investment program of carrying out 55 sq km of 3D seismic in the Espejo block and drilling four exploration wells in each block, with a total estimated investment commitment of $60 million over the next four years. That means that these blocks will incur a capital expenditure of $30 million net to GeoPark.
James F. Park, CEO of GeoPark, said:
“Congratulations to the GeoPark team for again patiently, selectively, and successfully expanding our unique Latin America asset base with the acquisition of these new low-cost, low-risk, high potential blocks attractively positioned in the neighborhood of some prolific oil fields. Our entry into Ecuador gives GeoPark an exciting new platform in the country with the third largest reserves in Latin America and further advances one of our key long-term growth strategies tying together the common petroleum system of southern Colombia, Ecuador and northern Peru.”
After winning these two blocks, GeoPark now holds a working interest in 29 contract blocks in 11 sedimentary basins across six Latin American countries, totaling 3.55 million acres net to its working interest (Table 1) (Fig. 7).
Table 1. GeoPark contract blocks. The author’s tabulation based on the source.
Fig. 7. GeoPark’s geographical presence in Latin America, modified after the source.
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