Colombian oil production on the rise
The prospects for the oil and industry in Colombia look promising, with production and reserves increasing and investors pumping money into the country
Colombian oil production rose by 20% last year and could achieve 15% growth this year, according to the upstream regulator Agencia Nacional de Hidrocarburos (ANH). That would mean a rise from about 0.7m barrels a day (b/d) at the end of this year to over 0.8m b/d by year-end 2010, putting the country within reach of its oil-production record of 0.83m b/d, achieved a decade ago.
It's an impressive reversal of fortune. After its 1999 peak, production entered a slump, falling to just over 0.5m b/d in 2005. Then, political risk was high, investment terms were deemed unattractive and Colombia was in danger of becoming a net oil importer. However, President Alvaro Uribe's crackdown on Marxist rebels has significantly improved security, reducing kidnappings and attacks on oil infrastructure. Improvements in fiscal terms and the country's growing reputation for legal stability and contract sanctity have also boosted business confidence, reversing the decline. Now, Colombia is on a growth path that could, says ANH, see it reach production of 1m b/d by 2015.
Business confidence is reflected in robust figures for foreign direct investment (FDI) in Colombia's petroleum sector. According to Armando Zamora, director-general of ANH, FDI in 2009 is likely to match 2008's total of $3.5bn – despite the global recession. And it could attain the same figure this year too. There are compelling indications that investment will continue at a similar, if not higher rate: firm contractual commitments for seismic acquisition and drilling for 2010 are around 60% higher than for 2009, says ANH.
Proved reserves have also been rising, from 1.4bn barrels at the end of 2008 to 1.7bn barrels 12 months later. That amounts to a net gain in reserves of 0.5m barrels, given that the country produced 200m barrels in 2009. And it implies a healthy reserves-replacement rate of 250%. The long-term reserves upside is also good, with ANH targeting 4bn barrels by 2020.
The contrast with the more hostile attitude to foreign investment adopted by Venezuela, Ecuador and Bolivia is marked. Political stability and an attractive investment framework even have the potential to convert Colombia into a hub for services to the wider region's petroleum industry, claims Zamora.
Against that backdrop, Colombia has just launched its 2010 upstream licensing round, offering exploration rights to 168 blocks. Covering more than 50m hectares of territory, Open Round Colombia 2010 includes full-blown exploration permits for 31 200,000-hectare blocks, about which ANH has "basic information". The agency is also offering 63 Technical Evaluation licences – short-term contracts that allow frontier areas to be evaluated for prospectivity without committing explorers to expensive drilling programmes. In addition, 74 smaller blocks – of between 30,000 and 40,000 hectares, close to existing producing areas – are to be auctioned in a mini-licensing round.
Over the next few months, the agency will take a roadshow to Toronto, Calgary, Houston, London, Madrid, Rio de Janeiro, Perth, Kuala Lumpur, New York and Shanghai (in December, events were held in Bogotá and Buenos Aires). It aims to award contracts in the second half of the year; energy minister Hernán Martínez has indicated that the government will be satisfied if ANH can license 80 out of 168 blocks.
Meanwhile, although oil dominates the energy sector, the prospects are also bright for natural gas, says Zamora. Colombian gas production amounts to just 1bn cubic feet (cf) a day, with 70% consumed locally and the remainder piped to Venezuela. Proved gas reserves, if used at the present rate, would last just 20 years, so there has been some opposition to large-scale gas-export schemes. But Zamora says Colombia could soon have proved up enough gas to emerge as a large exporter. "It's just a matter of time before we are confident enough to move into a totally new stage of our gas industry, which is to open up for exports," he tells Petroleum Economist, adding that there may be potential for one or more liquefied natural gas terminals.
Much of the gas would probably come from Colombia's gas-prone Caribbean waters. The Guajira gasfield, the country's main source of gas, has been producing for over 30 years. A recent study by Halliburton suggests that the Caribbean area – which includes the Chevron-operated Chuchupa, Ballena and Riohacha fields – may contain up to 50 trillion cf of gas. Exploration will start in earnest this year, with five wells expected in 2010. Companies with acreage in the area include BP, Petrobras, Ecopetrol, ExxonMobil, Hess, ONGC and BHP Billiton.
There have been onshore gas successes too. Last year, Hocol and its partners, Talisman Energy and Tepma, made a "significant gas condensate" discovery in the Andes foothills, 300 km northeast of Bogotá, which could signal the presence of a new hydrocarbons province in the middle of the country. Colombia could also become a significant part of the unconventional gas revolution. The country has "several trillion" cf in shale-gas deposits north of Bogotá, as well as large volumes of gas trapped in coal seams in the northern Guajira basin, says ANH.