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Gas discovery lifts Colombia’s deep-water hopes

Colombia faces declining prospects at the conventional onshore oilfields that have fueled its decade-long oil and gas boom

But a consortium led by Brazil’s Petrobras announced the country’s first ever deep-water discovery. The gas discovery was made at the Orca-1 well, drilled in the Tayrona Block about 40 kms offshore La Guajira province, which borders neighbouring Venezuela. The companies did not say how big they thought the discovery might be, and released few details from the well, but said they are now evaluating the data and its economic potential. 

In a presentation to analysts last year, Repsol said the Orca-1 well was targeting around 4 trillion cubic feet (cf) of gas. Colombia has 5.7 trillion cf of proved natural gas reserves.

Petrobras operates the Tayrona Block with a 40% stake, while state-run Ecopetrol holds a 30% interest and Spain’s Repsol holds the remaining 30% interest, though in September it announced that it had agreed to sell 10% of its stake to Norway’s Statoil.

The discovery will be cheered in Bogotá where policymakers have grown increasingly worried about the diminishing growth prospects of its oil and gas industry, which has been a major driver of the country’s strong economic growth over the past decade. 

To spur interest in new deep-water and unconventional frontiers, the government has improved fiscal terms, offered economic incentives and auctioned off vast swathes of new acreage. The Orca-1 discovery will offer some validation for the government’s strategy and could speed up investment offshore Colombia. 

Some of the industry’s biggest players have snapped up deep-water Colombian acreage in recent years, including Petrobras, Repsol, Anadarko, Shell, ExxonMobil, Statoil and BG Group. To date, however, no discoveries had been made and little drilling had been done. 

Repsol and Eni’s huge Perla discovery in 2009 in neighbouring Venezuela sparked interest in the Caribbean’s potential. The industry, however, had moved into Colombia hoping the more investor-friendly government will provide them with calmer waters than Venezuela, which has proved a difficult environment to develop complex and costly offshore projects. “The Perla discovery in 2009 proved for the first time in the entire Caribbean Sea the presence of a robust Tertiary petroleum system, capable of charging a giant field. Immediately after the discovery, Repsol embarked on an acreage expansion strategy to capture additional opportunities in neighbouring areas,” Joseba Murillas, Repsol’s head of exploration in Latin America, told Petroleum Economist earlier this year.

Murillas said that deep-water wells in Colombia could cost between $100 million and $200m depending on the depth of the well and rig availability. Given the high cost of drilling frontier deep-water wells in Colombia, companies have moved cautiously. But progress is accelerating and Colombia’s offshore potential will be tested over the next few years, though the recent oil price plunge could see frontier exploration for some companies shelved. 

Ecopetrol, which holds stakes in 13 offshore blocks, says it will drill two wells in 2015 and two or three more wells in 2016. Repsol is carrying out an extensive 3-D seismic survey offshore Colombia and plans to drill wells on its RC-11, RC-12 and Guajira offshore blocks in the coming years. Anadarko has also been carrying out 3-D seismic work across its acreage and plans to start drilling in 2015. 

Some questions will likely be raised over how the industry will be able to develop a major gas discovery, as opposed to oil, given Colombia’s complex natural gas market and limited existing infrastructure. The country produces around 1.1 billion cubic feet per day (cf/d) of natural gas, enough to meet domestic demand and export around 200m cf/d of gas via a pipeline to Venezuela. But slowing production growth and strong demand has raised fears of possible shortages, especially if droughts reduce the country’s hydropower supply. The government said late in 2013 that it was planning to build a $400m liquefied natural gas (LNG) import terminal to make sure domestic demand was met. 

Adding to the complexity, however, the country’s largest independent producer Pacific Rubiales is pushing a small-scale floating LNG export project to be supplied from its onshore La Creciente Block. It signed a heads of agreement to sell the gas to Russia’s Gazprom in late 2013, but a final deal has not been reached.  


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