Good financial terms and a chance to look at highly prospective offshore properties near proven production and close to existing infrastructure make Colombia’s Caribbean Round 2007 an attractive opportunity, according to ANH officers at a licensing round road show in Houston.

“Colombia is a great place to do business for a very long time,” said Bill Cline of Gaffney, Cline & Associates.

Tax reform legislation for 2007 has improved the country’s competitiveness. Income tax will

Colombia’s first offshore licensing round includes blocks off the Caribbean coast. (Map courtesy of ANH)
drop from 38.5% to 34% in 2007 and to 33% the following year, said Hernan Martinez, Minister of Mines and Energy.

“This is Colombia’s first offshore bidding round,” added Dr. Armando Zamora, director general of ANH, the national hydrocarbons agency. It is offering13 blocks off the Caribbean coast. Each block is about 740,000 acres (3,000 sq km). That makes each block about the size of 125 Gulf of Mexico blocks.

Some of the property is south of offshore tracts held by BHP Billiton, and the Middle Magdalena fan is near blocks held by Petrobras.

Good-quality seismic is available in the data package from 1993, but both CGGVeritas and GX Technology have conducted more recent surveys. Those are not part of the data package, but samples of those shoots are available for examination.

Detailed maps of the properties available are on the www.caribbeanround2007.com Web site, but the properties run from offshore Guajira at the northern tip of Colombia to the northern end of the Uraba Gulf, taking in nearly all of Colombia’s Caribbean coastline. It includes not only deepwater tracts but shallow blocks, some of which are both onshore and offshore.
Producing fields include Chuchupa with 5.7 Tcf in reserves, Ballena with more than 1.5 Tcf and Riohacha with less than 1 Tcf of gas. All the northern properties are gas-prone, but exploratory wells in the southern tracts displayed oil shows, according to Tomas Villamil, president of C&C Energy Group.

Data packages are available now for US $150,000. ANH will hold a clarification meeting July 10 and 11 in Bogota. It will publish the final tender protocol on Aug. 21. The regulatory agency will open and award bids on Sept. 18 and sign contracts the week of Oct. 2, Zamora said.

Columbia works on a sliding royalty scale starting with an 8% royalty up to 5,000 boe/d. It moves to 20% at 125,000 boe/d and peaks at 25% for production of 600,000 boe/d or more.
ANH also has a high-price participation element in which it gets 15% of production at an oil price of $60 or more and 20% of production at an oil price of $90 of more.

That system replaces the old 20% fixed royalty and Ecopetrol’s option to back in to a commercial discovery. There is no mandatory Ecopetrol participation.

Noting activity is growing in Colombia, Zamora said the nation had a goal of 30 new licenses last year and issued 44. It had a goal of 5,000 miles (8,000 km) of seismic and actually had 16,451 miles (26,491 km). It set a goal of 40 exploratory wells and reached 56, the second highest annual wildcat rate in Colombian history. This year it hopes to surpass 80 wildcats.
As in most licensing systems, operators will have to prequalify with operational, technical, legal and financial minimums. For example, the operations hurdle is 5,000 boe/d of production in 2006. For deepwater tracts, that hurdle moves to 5,000 boe/d of production from water deeper than 984 ft (300 m).

During a question and answer session, members of the audience — referring to events in Venezuela and Bolivia — asked the ANH delegation what assurance they had that contract terms would not be unilaterally changed. “Colombia has never changed a contract,” Martinez said.

In a surprise move, Zamora also announced plans for a licensing round later this year for heavy oil of 20º gravity or lower in the Llanos Basin. The belt starts roughly east of Bogota, extends eastward into the Llanos Basin and then bends north.

A Halliburton study of the area showed a 50% probability of 4.4 billion bbl of recoverable oil in the belt with a 90% chance of 2.1 billion bbl and a 10% chance of 8.3 billion bbl.
Zamora said ANH hoped to complete that bid round by the end of this year.