CEPSA will acquire a working interest of 80% in a hydrocarbons exploration and production contract on Block 127 in northeastern Peru.

This block, which was initially awarded to the Canadian company Loon Energy, will be operated by CEPSA under a farm-in agreement, once the Peruvian government authorities have formalised their approvals.

The initial exploration program will last 24 months, with the option of continuing with the exploration of the area for an additional 5 years.

As a result of the agreement, the company will further broaden its upstream asset portfolio. This license marks the beginning of activities in Peru and will be complemented in the near-term by the signature of new contracts with other companies. CEPSA Perú S.A., a wholly-owned subsidiary of CEPSA, and Loon Peru, a wholly-owned subsidiary of Calgary-based Loon Energy Inc., have entered into a farm-in agreement whereby CEPSA Perú will acquire a working interest in a hydrocarbons exploration and production license that Loon Energy holds in Block 127, in the Marañón Basin area of northeast Peru.

The exploration license contract, signed by and between Canada’s Loon Energy and Perupetro (the Peruvian government agency responsible for promoting private investment in the hydrocarbons sector) in August 2007, grants Loon Peru the right to explore for and produce hydrocarbons in Block 127, measuring 9,675 square kilometres. The terms of the contract likewise include the performance of seismic surveys, the reprocessing of existing seismic data and the preparation of technical studies. CEPSA Peru will be the operator of the block and acquire an 80% working interest in the license, which involves a work commitment that includes an initial phase of 24 months and four subsequent periods until completing an exploration term of 7 years.

Apart from this new agreement, CEPSA is in the process of finalising negotiations for additional contracts with other companies, aimed at expanding its activities in Peru. CEPSA currently has upstream assets in Algeria, Egypt, Colombia and Spain and the fields in which it holds interests produce approximately 250,000 BOPD. CEPSA’s efforts to expand its oil & gas upstream operations represent a further step forward in the company’s strategy of diversifying its businesses, with the target of achieving a more equitable balance in earnings contributions from its different segments.