VAMEX SIGNS OIL GAS EXPLORATION PRODUCTION CONTRACT FOR

UNCLAS LIMA 001380 SIPDIS SENSITIVE SIPDIS DEPT FOR WHA/AND,/EPSC, EEB/CBA, OES, E, TREASURY FOR AJEWELL, LTRAN STATE PASS TO EXIM, OPIC, TDA DEPT OF ENERGY FOR G. WARD, S. BROWNE ENERGY INFORMATION ADMINISTRATION FOR CHARLES ESSER E.O. 12958: N/A TAGS: EPET ENRG ETRD SENV PE SUBJECT: VAMEX SIGNS OIL GAS EXPLORATION PRODUCTION CONTRACT FOR BLOCK Z-38; ADVOCACY CASE CLOSED ¶1. (U) On April 12, 2007, PeruPetro, the GOP's oil and gas production and exploration licensing agency, signed an oil and gas exploration and production license contract with the U.S. firm Vietnam American Exploration Company LLC (VAMEX),covering off-shore Block Z-38, in northwest Peru, just south of Ecuador. The signing ceremony was witnessed by Minister of Energy and Mines, Juan Valdivia, who congratulated PeruPetro for signing this contract, the agency's second in 2007. VAMEX is based in Dallas, Texas and has experience drilling in Vietnam, the Philippines and Colombia. ¶2. (SBU) The Embassy advocated on behalf of VAMEX beginning in October 2006, when company representatives informed us that their negotiations were facing the risk of being derailed by PeruPetro officials. Officials at PeruPetro were reportedly trying to back down from their earlier commitments to the company. In December 2006, the Department also received a Congressional inquiry by Rep. Pete Sessions as the status of the negotiations. As a result of advocacy, the negotiations were concluded, the contract was overwhelmingly approved by PeruPetro's board and later by the GOP, and finally signed. ¶3. (SBU) VAMEX's President Art Morado was hopeful about the potential of the 1.2-million acre Block Z-38. PeruPetro expects VAMEX will spend $37 million during the exploration phase, on gathering geophysical data and drilling three exploration wells. Block Z-38 is next to offshore Block Z-1, where BPZ Energy, a small Houston-based energy firm, recently reported successful oil and gas tests on an exploratory well which it began drilling in September ¶2006. BPZ Energy's local representative told us the well tested at 5,900 barrels of crude oil per day (bpd) and 20 million cubic feet per day cfpd) of gas. This exploratory well, along with an existing well, will produce enough gas to feed BPZ's proposed 160 MW power generation plant on-shore. ¶4. (U) Post considers this advocacy case closed. STRUBLE