IOCs Stay Keen for Colombian Reserves

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• International oil companies continue to be attracted to Colombia’s nonconventional onshore potential and remaining conventional reserves, both offshore and onshore. • Colombia’s shale resources are potentially game-changing and could provide more than 50 years of gas reserves for the country. • Offshore exploration will target conventional reserves, while bid rounds will offer additional onshore and offshore blocks. The Issue Colombia continues to look to boost its hydrocarbon reserves amid the risk of the country’s resources depleting within a decade. The government’s plans consider the country’s limited hydrocarbon potential, an accelerating energy transition and a shrinking window of opportunity to develop certain fossil fuels (EIF Aug.11'21). Companies from state-backed Ecopetrol to Exxon Mobil are eyeing nonconventional resources that hold significant potential to boost reserves and production. Other, smaller opportunities exist to develop conventional resources offshore and onshore. But ongoing headwinds related to antifracking sentiment, infrastructure attacks, social protest and possible political change next year will weigh heavily on investment plans. One Last Push Colombia’s main economic metrics have deteriorated due to the Covid-19 pandemic and any sustained post-pandemic recovery will rely on the government’s ability to procure more domestic resources and avoid costly hydrocarbon imports, which would hit public finances (EIF Sep.9'20). Previously, in 2019, the country’s oil and gas sector accounted for about 5% of GDP, while its earnings, including from taxes and dividends, represented 17% of Colombia’s revenues. The focus of companies engaged in Colombia’s oil and gas sector is on the country’s most important projects that are both profitable and can deliver cash flow quickly. Ongoing hydrocarbon activities span both onshore and offshore regions of the country. Colombia’s hydrocarbon reserves are currently small compared to its South American neighbors. The country’s oil reserves of 2 billion barrels and gas reserves of 3.6 trillion cubic feet, are enough for 6.1 years and 7.8 years, respectively, according to BP’s Statistical Review of World Energy. The country’s oil and gas production was 961,000 equivalent barrels per day in 2020, its lowest level for several years according to the Colombian Petroleum Association (ACP). Shale Could be Game Changing Widespread adoption of fracking could boost Colombia’s gas reserves by 35-50 years, and jump start foreign direct investment and GDP, according to the country’s oil ministry. Colombia has technically recoverable shale resources of around 55 Tcf of gas and 6.8 billion bbl of oil, according to the US Energy Information Administration. Colombia’s high court, which has upheld a moratorium on commercial exploitation of nonconventional resources, has greenlighted the use of pilot projects to access potential widespread use of fracking. So far, only Exxon and Ecopetrol are approved to move forward with their Kale and Platero fracking pilot projects in the Middle Magdalena Valley Basin. Initial drilling related to the pilots could commence in late 2021 or early 2022 after the issuing of corresponding licenses, according to Colombia’s oil regulator ANH and the oil ministry. Colombia’s high court is expected to rule in late 2022 on whether the projects can move to the commercial development stage. Still, local opposition to the projects could deter deeper commitments to develop shale resources by the companies or deter interest from other potential parties. It could also intensify existing strong public opposition to hydraulic fracturing. Conventionals Attract Interest Colombia continues to eye potential resources offshore, in its Caribbean and Pacific waters. But uncertainty also abounds here due to the inherent difficulty and cost of such operations. Promigas, which transports 52% of Colombia’s natural gas and supplies 40% of the national market, estimates Colombia’s potential gas reserves at around 54 Tcf. Of the total, 30 Tcf of reserves are offshore with 24 Tcf onshore in nonconventional reservoirs principally in the Middle Magdalena, Cesar-Rancheria and Catatumbo regions. Exploration activities in Colombia have yet to take off after the oil price crisis of 2015. Meanwhile, the current drilling of 40-50 exploratory wells per year is insufficient to significantly boost reserves and production. And investments offshore, like those in nonconventional areas, will have to undergo development studies prior to exploratory drilling slated for 2022, according to the ACP. At least four contracts between oil companies and ANH involve discovery assessment programs. These include COL-5, Fuerte Sur, Purple Angel and the Tayrona Block. Ecopetrol and Shell will develop the first three while Ecopetrol and Brazil’s Petrobras will develop the fourth. For the remainder of 2021 and in 2022, at least three exploration wells are planned offshore Colombia’s Caribbean coast. Wells in 2021 could include the Cumbia-1 (COL-3) and the Uchuva-1 (Tayrona), Colombia’s Deputy Energy Minister Miguel Lotero said this month. In 2022, the Gorgon-2 well is expected to delimit the COL-5 Block. Other conventional blocks will be on offer during Colombia’s 2021 bid round, which kicks off later this month. The round includes licenses in nine basins that hold 28 onshore and offshore areas, as well as four nominated areas. The resource potential is estimated at 1.1 billion bbl of oil and 1.3 Tcf of gas, with the largest gas resources located off Colombia’s Pacific Coast. Pietro Pitts, Houston Colombia - Key Players to Watch Shell 60% interest in two deepwater blocks; also operates with a

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