Japanese, Canadian firms to explore Colombian acreage

Colombian shared-risk blocks [16885 bytes]

Japan National Oil Corp. and a subsidiary of Canadian Occidental Petroleum have won exploration rights covering two promising blocks in Colombia on a shared-risk basis with state oil company Empresa Colombiana de Petroleos (Ecopetrol).

Through a private government auction, JNOC won rights to the San Lope block containing the Tocoragua structure straddling Arauca and Casanare departments in the Llanos area of the Amazon basin.

CanOxy unit Canadian Petroleum International Resources Ltd. won rights to the San Juan block containing the Troyano structure in the Putumayo department of southern Colombia near the Ecuadorian border.

Gesture to foreign firms

The government offered the two blocks-formerly reserved exclusively for Ecopetrol-as a gesture to foreign oil companies that it was more open to outside investment.

Many companies have decried Colombia's tax regime and production take as onerous (see related story, p. 20). As a result, exploration activity has slipped dramatically in recent years.

Besides JNOC and CanOxy, only three other companies-of 17 invited to make bids-responded with offers.

The other bidders were Texaco Inc., Total, and a combine of ARCO and Brazil's state-owned Braspetro.

The low number of offers may reflect risks associated with the intensifying political unrest in Colombia. Putumayo was the scene in September of major confrontations between the Colombian army and guerrillas and guerrilla-backed coca farmers that left dozens dead. Plans to drill by CanOxy's sister company, Occidental de Colombia, on a block in the Llanos area not far from Tocoragua, has been held up by protests from indigenous groups.

Block details

The Tocoragua block won by JNOC covers 54,362 acres and features a postulated oil resource Ecopetrol estimates at 400 million bbl.

The Troyano block covers 42,000 acres and has a postulated resource Ecopetrol estimates at 200 million bbl.

Both lie in the oil-rich Eastern Cordillera foothills and feature geology resembling that at Cusiana field, now under development by British Petroleum Co. plc and partners that by 1998 is expected to produce 500,000 b/d of oil.

Under the shared-risk regime, Ecopetrol will pay half of all drilling and exploration costs from the outset in return for a higher-than-usual share of oil production.

For Tocoragua, JNOC's winning bid gives Ecopetrol 71% of production, keeping 29% for itself. The government take could reach as much as 90% with additional taxes and royalties, if any commercial development achieves profit and production targets.

Company strategies

A JNOC official in Houston said the Tocoragua block will be the company's first deal in Colombia but represents a new emphasis on Latin American investment. Currently, JNOC is developing but not yet producing oil in partnership with Venezuela's national oil company Petroleos de Venezuela SA. It also is exploring downstream opportunities with Mexico's national company Petroleos Mexicanos.

CanOxy's winning bid assigns Ecopetrol 58% of all production at Troyano once the project is commercially viable, going higher once production targets are met.

CanOxy officials in Calgary said the bid is part of the company's aggressive strategy of "developing a strong exploration base in partnership with the national oil company."

The first wildcat will spud early in 1997, the company said.

CanOxy is active in Colombia, with a 40% interest in the Boqueron block, where exploration is under way.

CanOxy sees Ecuador, where it is a 15% partner with Oxy in Block 15, Venezuela, and Colombia as its future focus areas in Latin America.