--Pacific Rubiales buys 35% of four blocks from Karoon Gas
--Will pay US$40M cash plus up to US$210M in initial drilling
costs
--Exploration campaign on Santos Basin blocks starts early
2013
(Recasts to add background on Colombia's oil industry, Pacific
Rubiales comments throughout)
By Ross Kelly
SYDNEY--In another sign of Colombia's fast emergence as a major
player in South American energy markets, Pacific Rubiales Energy
Corp. (PRE.T) has taken a stake in exploration blocks offshore
Brazil for up to US$250 million.
Once crippled by Marxist guerrilla activity in and around some
of its most promising oil fields, Colombia's oil industry has
undergone a transformation in recent years as military success
drove insurgents out of much of the countryside. Oil production in
Colombia has grown at more than 6% a year since a low point in
2003. The upturn has also been assisted by policies encouraging
foreign investment in the industry and helped companies such as
Pacific Rubiales accumulate capital to expand.
"With these new assets, Pacific Rubiales will increase its
presence in South America and enter into one of the most prolific
oil-rich hydrocarbon basins in the western hemisphere," Chief
Executive Ronald Pantin said in a statement Wednesday. The
company's assets are currently concentrated in Colombia, Peru and
Venezuela.
It has bought a 35% interest in four exploration blocks in the
Santos Basin, located south of Rio de Janeiro, from Karoon Gas
Australia Ltd. (KAR.AU) ahead of a three-well exploration campaign
expected to kick off early next year.
Pending relevant regulatory approvals for the deal, Pacific
Rubiales will give Karoon US$40 million cash and carry a sizeable
share of the drilling costs.
Colombia's second-biggest oil producer behind state-owned
Ecopetrol will carry up to the first US$70 million in costs for
each of the first two exploration wells--called Kangaroo and
Emu--and 35% of any extra costs for each well.
It has an option to participate in a third well, Bilby, under
the same conditions and another option to take a 35% interest in a
fifth block.
The properties are in much shallower water than recent giant
discoveries further offshore such as the Tupi field. However,
significant commercial discoveries have been made closer to the
coast.
The most notable is the Piracuca oil field just five kilometers
northeast of Karoon's blocks. Petrobras and partner Repsol SA
(REP.MC) in 2009 declared Piracuca a commercial discovery estimated
to contain 550 million barrels of light oil.
Pacific Rubiales said that although the blocks come with
moderate exploration risk, they have a "high reward profile" and
could contain large resources. The Bogota-based company and its
Australian partner will have to overcome development challenges
that have weighed on Brazil's promising oil and gas sector.
In contrast to Colombia, Brazil's energy industry is having
difficulty reaching its potential amid high development costs
blamed on government policy that limits the deployment of foreign
capital and expertise. Shares of Brazilian oil companies including
state-controlled Petrobras and OGX Petroleo e Gas Participacoes
(OGXP3.PR) have fallen rapidly in recent years, prompting Karoon in
late 2010 to pull the plug on an initial public offering of its
South American assets.
Karoon shares were up 8.3% at A$5.51 in Sydney by 0424 GMT.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com
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