Emerald Energy reported Friday the start of the Gigante No.2 development well in the producing Tetuan reservoir and expects the well to recover four million barrels of existing oil reserves at rates approaching 3,000 barrels of oil per day, as at the No. 1 well.

The cost of the well to the Tetuan reservoir will be shared equally between Emerald and Ecopetrol S.A. the Colombian oil company with a 50 percent interest in the Gigante field.

In addition, Emerald, at its own cost which is expected to be approximately $2 million, will deepen the well to the prospective Caballos formation approximately 120 feet below the Tetuan reservoir to evaluate the exploration potential of this deeper horizon.

The Company estimates the Caballos formation may contain 15 million barrels of unrisked recoverable resources. In the event of success, Ecopetrol has the right, under the Association Contract, to participate at a 50% interest in development of the Caballos formation by reimbursing a 50% share of exploration costs.

Gigante No.2 is expected to have a total drilling depth of approximately 16,000 feet and take approximately 6 months to drill and evaluate. The total cost of the well is expected to be approximately $36 million, with Emerald paying $19 million and Ecopetrol paying $17 million.

Prior to the end of the third quarter of 2008, Emerald had pre-invested approximately $5 million in site preparation and materials for the project. The Company therefore expects that Emerald's remaining expenditure for the Gigante No.2 well will be approximately $14 million.

The Gigante No.2 well forms part of the Company's 2008/2009 capital investment programme, all of which is expected to be funded from existing cash and cash generated from operations.

The Gigante field, located in the Matambo block in the Upper Magdalena Valley, commenced production in 1999 from the Gigante No.1A well and has subsequently produced over 2.75 million barrels of oil with a current production rate of approximately 950 barrels of oil per day.

Tags: Emerald Energy Plc