Llanos Basin - Heavy Oil Belt

A significant opportunity exists in a large heavy oil fairway located in the southern and eastern portion of the Llanos Basin. A number of fields have been discovered and are producing, although the area is largely unexplored and under-developed. The government is committed to developing this significant resource and has reserved much of this acreage for future bidding rounds which may require large initial work programs and alternative fiscal terms. Petrominerales is fortunate to have captured 0.8 million acres in this highly prospective region pursuant to three separate exploration contracts, all under Colombia's existing fiscal framework. Like conventional oil resources in the northern Llanos Basin, the heavy oil belt has parallels to the geology in Canada's Western Sedimentary Basin. Under optimal depositional and migration patterns, this belt could extend across the entire length of the Llanos Basin, and be as large aerially as the giant Faja del Orinoco in Venezuela. Four heavy oil projects in the Venezuelan Faja del Orinoco are producing approximately 600,000 bopd. While the Venezuelan portion of the heavy oil belt is considerably more developed to date, we believe the Colombian heavy oil belt has excellent potential for future heavy oil exploitation.

We have three large exploration blocks in the southern Llanos Basin heavy oil belt; Chiguiro Oeste, Chiguiro Este and Rio Ariari. The blocks were initially acquired as Technical Evaluation Agreements (TEAs) in 2005 when competition for heavy oil was minimal and the fiscal terms were particularly favourable. The TEAs were subsequently converted to exploration blocks in 2007. All three of the blocks surround the Caño Sur Block, which is being developed through a partnership between Ecopetrol and Shell. Heavy oil pool leads are evident in the Caño Sur area and on our Rio Ariari and Chiguiro Blocks. Our recently acquired seismic programs in the area have generated additional leads and prospects that we will start to evaluate with drilling in early 2009.

Leading heavy oil production technology - THAI™

Petrominerales has a significant competitive advantage in the development of Colombia's heavy oil resources with access to the world-leading production technology known as THAI™, which is an in-situ combustion process. This technology is considered a paradigm shift in the production of heavy oil. The process has been field-proven in the Canadian oil sands and is being expanded internationally by Archon Technologies Ltd. (Archon), a 100 percent-owned subsidiary of the Company's largest shareholder, Petrobank Energy and Resources Ltd.

The THAI™ process has distinct operational, economic and environmental advantages over existing processes. Oil recovery rates can be improved to as high as 80 percent of original oil-in-place. Due to the high temperatures in the combustion process, production has been shown to undergo partial in-situ upgrading, producing a higher value product that is more easily transportable and requires less refining. Other advantages include lower capital costs than similar processes, rapid construction and on-stream time frames and substantially reduced environmental impacts.

Having signed an agreement with Archon, Petrominerales has the rights to deploy the technology in Colombia. The license grants the right to use the technology in the evaluation of our exploration blocks, subject to a licensing fee equal to 10 percent of gross production. The successful application of THAI™ could significantly increase heavy oil recovery and advance the development of heavy oil in Colombia.

For a detailed explanation of the THAI™ process click here.