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Houston-based oil and gas company BPZ Energy is developing a
US$250mn-300mn project to supply some 200mn cubic feet a day (mcf/d)
from northern Peru to power generators in Ecuador, BPZ Energy president
Manolo Zuniga, claims. Plans include drilling 20 wells and building a
100MW power plant in northern Peru, as well as a 150-mile gas pipeline
from the Peruvian blocks to Guayaquil in Ecuador.
BPZ is talking
to various companies about a probable joint venture, whose partners
would be defined in three months, Zuniga says, adding that BPZ would
operate the consortium, and its partners – probably exploration and
production companies – would take equity stakes.

BPZ is becoming a 100% operator of northern Peru’s block Z-1 after
US-based Nuevo Energy relinquished its 95% stake in the block when it
was bought out by Plains Exploration & Production Company in May,
Zuniga says.

BPZ expects to complete the deal and sign a new contract with Peru’s government in the next three months, Zuniga adds.
gas potential on Z-1’s Corvina and Piedra Redonda structures are 2tn
cubic feet (tcf). BPZ Energy also has a 100% stake in block 19, where
estimated gas reserves are 0.5tcf.

The company plans to drill about two thirds of the 20 new wells on block Z-1 and the remainder on block 19, Zuniga says.
gas would be used to generate power in Peru and Ecuador in three
simultaneous stages. In the first stage, BPZ Energy would build and
supply 20mcf/d of gas to a 100MW capacity project in Tumbes, in the
north of Peru.

Because transmission capacity from there to central Peru is
limited, the Tumbes plant would mainly dispatch to Ecuador through an
interconnection that is under construction and is expected to start up
in September-October.

“The idea is to have the plant running by the middle of 2005,” he says.
are doing the pre-engineering right now and we need to see how the
markets are behaving,” Zuniga says, adding BPZ could call for bids or
form a joint venture to build the generation plant.
Investment in
this stage is estimated at about US$50mn, which BPZ plans to finance
through funds raised by taking the company public on the American Stock
Exchange following a merger with Nasdaq listed US company Navidec,
Zuniga said. The merger is expected to close in the first week of

The Peru-Ecuador bi-national development fund is expected to
coordinate the financing of the project’s second and third stages. The
Andean Development Corporation (CAF), the Inter-American Development
Bank (IADB) and the World Bank’s International Finance Corporation
(IFC) could participate, Zuniga says.

“The financing should fall into place given the urgency of Ecuador to bring cheaper power into the country,” Zuniga says.
second stage, estimated at US$60mn, involves building a gas pipeline
interconnecting Tumbes with the Ecuadorian town of Arenillas, about 10
miles north of the border. BPZ already has preliminary agreements to
supply up to 20mcf/d to state-owned Ecuadorian generator Termopichincha
and 27mcf/d to private company Intervisa from early 2006.

Neither company is presently located in Arenillas, but would
transfer their respective plants – the 51MW Santa Rosa plant, and
a 105MW power barge – to Arenillas to be able to use the gas.
third and final stage would extend the pipeline north from Arenillas to
supply power generators in Guayaquil, the statement said. Investment in
the pipeline and wells would be about US$170mn-180mn, Zuniga says,
adding that operations would start in the second half of 2006.
now Guayaquil is generating about 600MW using diesel, so there is a
drive in Guayaquil to bring in a better source of fuel, and that will
be gas,” Zuniga says.

BPZ Energy already has a preliminary agreement to supply 50mcf/d to Electro Guayaquil’s plant on the outskirts of Guayaquil.
that, the 47mcf/d in Arenillas and another two agreements BPZ expects
to sign in the next few weeks, potential gas sales of the whole project
are some 200mcf/d, Zuniga says.

Final 10-year take or pay contracts with power companies in
Arenillas and Guayaquil will be signed in early 2005, subject to
confirmation of BPZ Energy reserve estimates which the company expects
to complete in September this year, Zuniga says.

The initial wellhead gas price has been agreed at US$1.30/mBTU,
with provisions for price increases based on inflation or other energy
BPZ Energy and Colorado-based Navidec have executed a
merger agreement, under which BPZ will become a wholly owned subsidiary
of Navidec in a tax-free share exchange and Navidec will change its
name to BPZ Energy.

The merger, which is subject to the successful completion of at
least a US$3mn private placement of Navidec shares, is expected to
close in the first week of August, Navidec’s president and CEO John
McKowen, says.
Upon closing, BPZ Energy expects to file an application for listing on the American Stock Exchange.