Colombia's oil production has grown in the last few years, but state company Empresa Colombiana de Petroleos (Ecopetrol) reckons activity to date has only scratched the surface of its potential.
Antonio Urdinola-Uribe, new president of Ecopetrol, told OGJ, "We think we have not discovered more than 10% of Colombia's reserves, but the job ahead is too much for Ecopetrol alone."
The company has lured foreign companies into Colombia under association contract legislation. BP Exploration Operating Co. Ltd. has made the biggest splash, finding 2-2.5 billion bbl of oil in Cusiana and Cupiagua fields.
In contracts assigned to date, foreign firms take all the exploration risk. If a commercial discovery is made, Ecopetrol can take a 50% stake, pay back half the exploration costs, and then pay half of development costs.
These terms were acceptable to foreign firms until last year, when BP complained that they would make development of its discoveries in the Piedemonte contract area uneconomic.
Admission
BP has discovered Florena, Volcanera, and Pauta fields on Piedemonte block, with combined estimated reserves of 1 billion bbl of liquids and 3-4 tcf of gas.
BP asked the government for less onerous license terms for Piedemonte. At first, the government argued this would set a dangerous precedent for other foreign firms operating in Colombia (OGJ, Oct. 21, 1996, p. 20).
Now Urdinola-Uribe admits the association contracts are not attractive in comparison with other countries' terms, particularly for small or marginal discoveries.
"Seventy percent of Colombia's oil is produced from large fields," said Urdinola-Uribe, "while for most other countries, 70% of oil output typically comes from smaller fields.
"Reliance on large fields to such a degree creates an unstable production pattern, which must be changed. Hence, Ecopetrol is changing its licensing terms to attract interest in smaller and marginal fields."
Production target
Ecopetrol expects soon to be able to sustain oil production of 700,000 b/d.
It aims to stimulate development of smaller fields so as to reach a sustainable production capacity of 1 million b/d in the medium term. Booked oil reserves currently stand at a total of 3.5 billion bbl.
"We also want to double our reserves," said Urdinola-Uribe, "so we aim to double the amount of exploration, from 100 wells/year at present to around 200/year."
While association contracts will remain in place for large fields, Ecopetrol is working to complete new terms for smaller or marginal fields.
Instead of negotiating licenses on a first-come, first-served basis, Ecopetrol will offer future licenses for bidding: "We have to let the market define what it will pay."
Though Ecopetrol has not disclosed new terms yet, Urdinola-Uribe said the government is conscious that contract conditions will have to vary according to the area to be explored.
"In some areas, there is enough information available for companies to be able to assess exploration risks," said Urdinola-Uribe, "but 90% of Colombia's prospective areas are untouched."
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