Colombia's prospects

Patrick Crow
Washington, D.C.
[email protected]

Colombia's new Minister of Mines and Energy, Orlando Cabrales Martinez, anticipates revised oil and gas licensing terms will revitalize exploration and production.

Last year, operators drilled only 22 wildcats and shot 2,200 km of seismic in Colombia, compared with 67 holes and 9,600 km in 1990.

This year, output has climbed from 600,000 b/d to about 830,000 b/d as large new fields came on stream. But, without additional discoveries, it will peak at 1 million b/d in 2000, and exports will cease by 2006.

The export of about 500,000 b/d of light, sweet crude (75% going to the U.S.) has been a mainstay of Colombia's economy.

The potential production decline, and complaints by operators (OGJ, May 5, 1997, p. 60), prompted the government to revise the licensing terms last fall.

Unexplored basins

Cabrales, who has extensive oil industry experience, has been energy minister only a few months. He has spent much of that time promoting the E&P licensing changes.

He said, "This will make us more competitive with other Latin American countries and should bring more exploration activity to Colombia. I have already received very positive feedback from the companies."

The new formula is similar to one Venezuela has used to develop its smaller and marginal fields. It allows longer E&P periods and less participation by the state company Ecopetrol, but does not change royalties or the tax rate, about 82%.

Cabrales said exploration has focused on only four of 18 sedimentary basins. And only three fields account for 70% of total production.

The government estimates 3-5 million bbl must be found in the next 12 years to supply enough oil to sustain exportable surpluses.

Cabrales said the government will offer acreage under the new terms in March or April, but they are available now to companies developing smaller fields on existing concessions.

Sabotage, refinery

He said Colombia is fully committed to stopping sabotage and other attacks against oil facilities.

Cabrales said the government has increased the size of its police forces and has launched a campaign to educate the public that such attacks "are crimes against the people and against the environment."

He said such incidents have spilled 1 million bbl in 11 years and cost Colombians $250 million in royalties.

"The important thing is that we as a country are committed to solving this problem. We have modified our actions to solve it. Perhaps we're not successful yet, but we will keep trying until we are."

Cabrales also said the government wants an investor to build a refinery of about 150,000 b/d. The nation's two major refineries have a combined capacity of 243,000 b/d, but Colombia has been importing gasoline and other products for years.

"The government would look for ways to help such a venture. We don't use subsidies, but we are always ready to sign a long-term oil supply contract. The refinery owner could sell domestically or export products.

"Many people have said the margins for a new refinery would not be large enough, but in the long run, the margins have to be good."