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A report released recently by GlobalData highlights Colombia’s recovering oil and gas industry, which has made more than 135 discoveries in the past five years following years of declining exploration activity.
E&P activity in Colombia is making a comeback nearly a decade after guerilla attacks prompted oil and gas companies to abandon operations.
With more than 135 oil and gas discoveries made during 2007-12, the South American country has positioned itself as the third most attractive upstream destination for investors, following Brazil and Australia, according to a recent report by analytics firm GlobalData. Financial deals during the same time period surpassed US $7.7 billion, and the firm predicts more growth is on the horizon for Colombia considering the potential of its reserves and fossil fuels.
“Colombia is increasingly gaining importance in the global oil industry, as the country’s friendly fiscal regime for oil and gas investors complements the growing worldwide demand for fossil fuels,” according to the GlobalData report. “Colombia is swiftly recovering from its bad reputation, as the government works to make the oil and gas industry safe and financially attractive.”
Figures from the BP Statistical Review of World Energy 2012 show Colombia had proved oil and gas reserves of an estimated 3.02 Bboe at year-end 2011, increasing at an average annual growth rate of 5.7%. Those proven reserves included 2 Bbbl of proved oil reserves and 163 Bcm of natural gas reserves.
From 2006 to 2011, oil and gas production grew at an average annual growth rate of about 9.9%, according to the GlobalData report. Production stood at 400.5 MMboe in 2011 and could jump to 627 MMboe by 2020. Light oil made up about half of what was produced in 2011, followed by heavy oil at 31.8% and natural gas at 18.2%.
Figures painted a different picture in the early 2000s due to the attacks that pitted the Colombian government against guerillas, which included the Revolutionary Armed Forces of Colombia. The attacks prompted foreigners to pull their investments, causing foreign direct investment for the petroleum sector to drop from $521 million in 2001 to $278 million in 2003, GlobalData noted.
Data from the US Energy Information Agency (EIA) show Colombia’s oil production had been flat following a decline that started in 1999, when production reached a peak of 830,000 b/d. The EIA attributed the decrease to “natural declines at existing oil fields and a lack of sizable new reserve discoveries.” But the trend has reversed in recent years with 923,000 b/d produced in 2011, up 35% from 595,000 b/d produced in 2008.
A number of initiatives brought forward by the government as the guerilla warfare subsided helped turn the situation around. However, guerillas still target pipelines but not as much as in the past, despite a recent uptick in attacks. About 31 attacks against pipelines were reported in 2010, compared to 84 attacks in 2011. But, that is much less than the hundreds that happened annually in the early 2000s, according to the Colombian government.
Initiatives to spur oil and gas development, according to the EIA, included: allowing foreign oil companies to own 100% stakes in oil ventures and compete with Ecopetrol – the state oil company that is being privatized to boost upstream activity; implementing a sliding, scale royalty rate for oil projects; and extending time for exploration licenses.
The government even ordered a 40% discount on royalties from nonconventional gas in 2011.
A third of 110 blocks offered in a bidding round that opened in February could contain shale or coalbed methane gas, according to the EIA. Thirteen deepwater offshore blocks that potentially hold crude oil and natural gas also were up for auction.
The incentives and potential for hydrocarbon finds have sent companies back into Colombia.
The top five companies operating in Colombia, excluding Ecopetrol, include Meta Petroleum (a subsidiary of Pacific Rubiales) and Petrominerales Colombia Ltd. The GlobalData report showed Pacific Rubiales’ higher net production of oil and gas – which skyrocketed by 52% in 2011 compared to 2010 – was due primarily to higher production from Colombia’s Rubiales and Quifa SW fields. Pacific Rubiales was called a “strong independent E&P company in Colombia” by GlobalData, which noted a number of the company’s subsidiaries with operations there. These include Petromagdalena (formerly Alange Energy), Pacific Stratus Energy Ltd., Kappa Energy Co. Inc., and Maurel et Prom Colombia BV (49.99% stake in Maurel).
But Pacific Rubiales isn’t alone. Other companies are turning to Colombia in hopes of finding success.
Sagres Energy announced in September that it was shifting its focus to its Colombian assets, ditching further investment in Jamaica. The company’s Colombia portfolio includes a joint venture on the El Triunfo block in the oil-rich Llanos basin.
Companies are making finds, while others are starting production.
• Ecopetrol said in September that it found crude oil at the Aullador-I exploratory well located in Santander
Province, 27 km (17 miles) from the municipality of Sabana de Torres.
• Petroamerica Oil Corp. reported in September that its Las Maracas-4 well, drilled on the Los Ocarros block in the Llanos basin of Colombia, is producing at a rate of approximately 1,500 b/d of oil from the Gacheta formation.
• Amerisur Resources announced in October that its Platanillo-5 well in the Platanillo field flowed about 2,472 b/d of 31.8° API oil with trace water. The well has been placed on commercial production.
Companies are gearing up for the next Colombian bidding round, with bids set to be presented Oct. 17. Those competing for blocks in mature basins include the Andes Energia-Integra Oil & Gas joint venture, ConocoPhillips, EOG, ExxonMobil, Petrobras, Shell, Statoil, Total, and YPF.
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