• 4 minutes Will We Ever See 100$+ OIL?
  • 8 minutes Iran downs US drone. No military response . . Just Destroy their economy. Can Senator Kerry be tried for aiding enemy ?
  • 11 minutes Energy Outlook for Renewables. Pie in the sky or real?
  • 1 hour Iran Loses $130,000,000 Oil Revenue Every Day They Continue Their Games . . . .Opportunity Lost . . . Will Never Get It Back. . . . . LOL .
  • 3 hours Berkeley becomes first U.S. city to ban natural gas in new homes
  • 30 mins Renewables provided only about 4% of total global energy needs in 2018
  • 2 days Iran Captures British Tanker sailing through Straits of Hormuz
  • 1 day EIA Reports Are Fraudulent : EIA Is Conspiring With Trump To Keep Oil Prices Low
  • 3 days Drone For Drone = War: What is next in the U.S. - Iran the Gulf Episode
  • 1 hour Today in Energy
  • 13 hours Shale Oil will it self destruct?
  • 2 days Oil Rises After Iran Says It Seized Foreign Tanker In Gulf
  • 9 hours So You Think We’re Reducing Fossil Fuel? — Think Again
  • 3 hours N.Y. Governor Signs Climate Bill
  • 3 hours First limpet mines . . . . now fly a drone at low altitude directly at U.S. Navy ship. Think Iran wanted it taken out ? Maybe ? YES
  • 3 days LA Solar Power/Storage Contract
  • 19 hours U.S. Administration Moves To End Asylum Protections For Central Americans
Alt Text

The Scary Truth About Canada's Energy Security

Canada, the world’s fourth largest…

Alt Text

It’s Sink Or Swim For U.S. Shale

Cracks are emerging in the…

Alt Text

Oil Market Caps Gains And Losses

The fear of a new…

Alexis Arthur

Alexis Arthur

Alexis Arthur is energy policy associate at the Institute of the Americas, a think tank on Western Hemisphere Affairs based in La Jolla, Calif. She…

More Info

Premium Content

This Nation Could Host The Next Latin American Offshore Boom

With most of the attention focused squarely on Mexico and Brazil of late, it is easy to overlook Latin America’s broader offshore potential, particularly the smaller players such as Colombia.

Mexico’s proximity to proven reserves in the US Gulf of Mexico as well as its spotlight-grabbing energy reforms have rightly drawn investors’ gaze. But Mexico is not the only player in the game. Colombia in particular has touted its offshore prospects, though an inauspicious global investment environment as well as problems at home have seen investors withdraw from this once-promising energy space.

To be fair, investor interest in offshore exploration has ebbed across the region but Colombia in particular is struggling. The one-time darling of the Latin American energy world is taking a sobering look at its declining production and reserves, with serious concerns for its future energy security. Related: How Should Commodity Traders Now Think About Geopolitical Risk?

Still, Colombia’s potential should not be so readily discounted. According to an oft-cited 2012 study by the National University of Colombia, the nation’s offshore resources could triple Colombia’s natural gas reserves and increase its oil reserves by a factor of six.

Offshore reserve estimates range from 10 billion barrels of oil equivalent to over 55 billion.

The Colombian government is banking on major discoveries to reverse a trend in declining production and reserves. After almost doubling oil production between 2008 and 2014, and reaching the 1 million barrels per day milestone in 2013, Colombia has just 6.6 years of estimated oil reserves and 15.5 years of natural gas.

The National Hydrocarbons Agency (ANH) has argued that Colombia must drill between 200 and 230 wells per year to turn the situation around. In the first two months of 2015, just six wells were drilled. A lack of exploration activity has been linked to low global oil prices, increased taxes on energy companies, and Colombia’s political and business environment more generally.

For those who observe Colombia closely, this is not wholly unexpected, particularly in the wake of a lackluster oil and gas auction last year. Just 26 of the 95 blocks on offer received bids under Ronda Colombia 2014. Moreover, the $1.4 billion raised came in well under the expected $2.4 billion. Related: This Is What Will Determine If Oil Prices Go Up Or Down

The offshore results were a little less disappointing. Four firms bid on the five offshore areas, with a total investment commitment of $540 million. A Shell/Ecopetrol venture in the deepwater was the top bid overall; a $231 million investment in SIN OFF 7. The third largest bid of the auction was also an offshore block, with Anadarko bidding $152 million for COL 6. Both are off Colombia’s northern, Caribbean coast. The entrance of Norwegian oil company, Statoil, was also a positive sign. The company now has two farm-in deals with Repsol as well as a share in COL 4 block with ExxonMobil and Repsol.

Some were surprised that the 19 offshore blocks available failed to attract more attention. Regional competition, in particular from the newly-opened Mexican market, was one factor. The high risk of investing in Colombia’s relatively untested offshore waters was another.

Low oil prices have only added to the challenge. Colombia’s national oil company, Ecopetrol slashed its offshore budget this year, bringing it down to $200 million from $632 million in 2014. Although this is in line with regional and global trends.

Colombia’s energy strategy is still banking on a major offshore discovery to revive its energy fortunes.

Petrobras and Ecopetrol have announced a natural gas discovery at the Orca 1 well in the shallow waters off Guajira. While further evaluation is necessary, early signs are good. A major find would be the first since the 1990s in Colombia and a much-needed boost for the nation’s energy sector.

Further success would lower the risk in adjacent areas, sparking more interest in future bid rounds. For now, the Colombian government has announced that it will not be holding an oil and gas auction for at least two years while it focuses on increasing production in existing concessions. Related: Energy Stocks May Be A Safe Haven For U.S. Investors

Including those awarded in Ronda Colombia, the government has 23 active contracts for offshore blocks – 21 off the Caribbean Coast and 2 off the Pacific.

The ANH and national government have announced a new plan to address some of the institutional barriers in an effort to reduce the cost of drilling, again with a particular focus on stimulating offshore interest.

In the short term, Colombia has a tough road ahead but oil and gas projects - in particular offshore - are a long term business. Political, financial, and institutional changes can be made to streamline the process and make Colombia an attractive place to do business again. In its current situation, Colombia has little to lose.

By Alexis Arthur for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play