In its 20,000 square miles, roughly the land mass of South Louisiana, the Central American republic of Costa Rica boasts not a single producing oil or gas well. The democratic government aims to change this, as its first-world constituency-a whopping 95% is literate and life the expectancy is 76 years- demonstrates an increasing need for more energy supply. Forecasts are for this expanding economy-fueled largely by tourism, manufacturing, and the banana and coffee businesses-to demand 10% more energy annually. The country currently imports more than 35,000 barrels of crude oil and refined products a day. In 1998, the ministry of environment and energy-a combination of duties that may seem an oxymoron to many in the U.S.-held Costa Rica's first round of oil exploration bidding. On the table were two onshore and two offshore blocks on the Caribbean coast, all adjacent and totaling 1.4 million acres, or about the size of Delaware. Privately held, New Orleans-based MKJ Xploration Inc. won these, after 20 years of study of what could lie beneath this land of wonders, such as the annual homecoming of thousands of endangered, nesting sea turtles. Upon winning the four blocks, MKJ brought in publicly held Harken Energy Corp., Houston, (Amex: HEC) as its partner, forming Harken Costa Rica Holdings, 80% owned by Harken, which paid $4.2 million cash and 20,000 three-year common-share purchase warrants to get in. Part of the North and South Limon Back Arc basins, the blocks-Nos. 2 and 4 being onshore, and 3 and 12 offshore-include and surround Puerto Limon on the Caribbean coast. Denver-based Mallon Resources Corp. (Nasdaq: MLRC) followed MKJ and Harken on the path to holding a Costa Rican concession. Last spring, it won six-year exploration and 20-year production rights to six onshore blocks totaling 2.3 million acres, north of the Harken-MKJ properties. The Mallon area covers 60% of the San Carlos and North Limon basins. First drilling will likely be on a large structure that has 1,500 feet of relief and active oil seeps nearby, says George O. Mallon Jr., chairman. Like Harken and MKJ, Mallon is looking for partners. The features the Mallon explorationists see in their concession are similar to those Harken and MKJ have found in theirs. "We believe our concession contains all the necessary elements of a successful exploration play-source rock, reservoir rock, traps and seals," Mallon says. The concession overlies two known source rocks, one time equivalent to the source rock found in the huge Venezuelan fields, he says, and displays similar high organic values. "In addition, a nearby stratigraphic test contained live oil, giving us encouragement for finding economic hydrocarbons." The U.S. operators' contracts call for royalty payments to the government of a minimum 1% of oil production when less than 21 barrels per day, and a maximum 15% when more than 1,000 barrels per day. Any of the unused exploration years can be applied to the production period. To be first Harken's hopes to be the first to produce a native Costa Rican supply of oil and gas will get under way in the third quarter with the drilling of its first exploratory well, Moin-2. The company anticipated an earlier start but that was stunted by a request for judicial relief, filed by members of the indigenous Bri-Bri community, as well as other peoples and organizations, who expressed opposition to oil and gas exploration in the Harken concession area. Some of the onshore acreage remains in contention but the offshore drilling issue has been mostly resolved, according to Steve Voss, Harken vice chairman, and it is offshore that the company plans to drill first. Meanwhile, Harken is waiting for the leatherback turtle nesting season to end, in late May, before proceeding. Costa Rica's Caribbean shore is the world's largest nesting site of the green turtle and a major host of the leatherback version, which can weigh as much as 1,500 pounds. Both make monster-truck-style tracks in the sand in their protracted trek ashore to lay their eggs and then return to sea. The green turtle predominantly nests farther north of Harken's Moin-2 drilling site, from late-June through October. The sensitive female turtle, who may be nesting for the first time at the age of 50, will return to the ocean if disturbed while coming ashore to lay her eggs, and lights will confuse both mother and hatchlings, which are aided by the horizon in their travel. "The noise was certainly a factor during the seismic activity," says Cindy Taft, director of international programs for the San Jose, Costa Rica-based Caribbean Conservation Corp., a nonprofit organization. The CCC was among the 30 or 40 coplaintiffs in the court action this fall. However, the 100 square kilometers of 3-D seismic that was shot for Harken as part of its evaluation of its offshore concessions was done during the winter, which is not a nesting period for the green or leatherback turtle, says J. Marc Lewis, Harken vice president, investor relations. "The time window was chosen not only to protect nesting, but migration as well. Our operating plan is from a conservative and environmentally sensitive approach." Taft says the CCC is more concerned about oil spills, than drilling activity. Turtle hatchlings will make a home for years upon floating seaweed, which is known for attracting pollutants too, such as trash and oil. Young and old turtles eat, or try to eat, just about anything; a leatherback easily mistakes a plastic bag for a yummy, large jellyfish. The targets The Moin-2 well is planned about 10 kilometers offshore and 12 kilometers north of Puerto Limon, in the neighborhood of Unocal Corp.'s onshore Victoria-1 and Limon-1 wells, which were drilled to about 10,500 feet each, and Elf Aquitaine's offshore Moin-1 well, which was drilled to 6,844 feet. All of these were drilled prior to 1976, with the Elf well being the country's last one by a nondomestic exploration company. Both Unocal wells tested oil; the Victoria-1 also had gas shows. The Elf well, drilled to Eocene-age rocks, had no shows. Harken's Moin-2 exploratory targets are Tertiary and the never-before-drilled Cretaceous. The company believes the prospect has 80,000 acres of Cretaceous fault segmented closure, one of the largest undrilled structures in the Caribbean Basin. Although structural size is not always indicative of recoverable reserves, the Moin prospect measures approximately twice the size of the most prolific Western hemisphere reserve discoveries during the past century, including La Paz in Venezuela (41,500 acres and 1.2 billion barrels in recoverable reserves), A.J. Bermundez in Mexico (40,000 acres and 3.5 billion barrels) and the Akal Complex in Mexico (35,000 acres and 18.3 billion barrels). Voss says the Costa Rican government has been more than helpful. "They've been very positive about the project, from the beginning." From 1970 until now, Costa Rica didn't have a private petroleum contract under which non-native oil explorers could do business. The last major oil company to operate in the country was Elf Aquitaine (now part of TotalFinaElf), drilling Moin-1 in 1975. Voss says the Costa Ricans' environmental concerns are not excessive. "They have rain forests and beautiful scenery. It's a gorgeous country with great people and a large tourism industry related to the ecological parks and rain forests. They are diligent, as everyone should be, about protecting their environment."