Drilling Report

Pan Andean Resources PLC
05 August 2004



                      Pan Andean - News Release DRD X-1004



•  Pan Andean spuds Bolivian Well
•  Pan Andean & Chaco (BP Group) launch due diligence of Gas-to-Liquids
   technology



Pan Andean Resources, explorers for and producers of oil and gas in South
America and in the US, is pleased to announce start of drilling of DRD X-1004 on
its gas and condensate field at El Dorado, near Santa Cruz, Bolivia.  The
interest is held through its subsidiary, Petrolex.



The well spuds this week and will be drilled to 4,290 metres (14,100 feet).  The
operator is our 90% partner, Chaco, which was formerly part of the Bolivian
National Petroleum Company (YPFB) and is now part of the BP Group.  The well is
projected to take 90 days, including testing.  Targets are the Petaca sands
(approximately 1,600m), the Ichoa Formation (2,200m), Iquiri and Los Monos
(4,000 to 4,500m).



In addition to anticipated exploratory upside, Pan Andean expects to convert
approximately 60% of the currently classified probable reserves to proven,
subject only to development of the Brazilian gas export market.  This equates to
100 billion cubic feet of gas and 1.6 million barrels of oil-condensate.



Following recent remapping and regional work, technical staff believes that the
DRD X-1004 well may increase the proportion of oil-condensate contained in
future production from the reservoir.  Pan Andean also hopes that significant
new reserves may be added to the west of a geological fault running through the
structure.



Pan Andean and Chaco have launched a Gaffney, Cline technical validation / due
diligence review of the Energy Technology Gas-to-Liquids project.  This
technology offers a pioneering low capital cost method of generating diesel fuel
from the gas available at El Dorado.  This may offer accelerated access to
market.



Managing Director, David Horgan, commented: 'The El Dorado X-1004 well marks a
return to vigorous development of our South American interests.  After three
years of regional retrenchment, energy demand is bouncing back. High oil prices
make gas-to-liquids projects economic.  Pan Andean hopes that these developments
will position El Dorado for early development as a GTL project and/or to exploit
the rapidly recovering gas demand in Brazil and Argentina'.



Contacts:

David Horgan, Pan Andean Resources:                 Tel.[phone]
Jim Finn, Pan Andean Resources:                     Tel.[phone]



James White - Redleaf Communications:               Tel.[phone]
Ian Rice - Rowan Dartington:                        Tel.[phone]


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