Some of the world’s largest oil companies are jostling for licences to explore for shale gas in Colombia, one of many countries hoping to replicate the North American boom in unconventional gas.
ExxonMobil, Royal Dutch Shell and ConocoPhillips are among the more than 80 companies bidding for licences, according to Javier Gutiérrez, chief executive of Ecopetrol, Colombia’s state-run energy company.
“There is definitely more interest in this licensing round than in previous ones,” he told the Financial Times.
The enthusiasm marks a turnround for Colombia, a country that was long a byword for political violence and instability.
For years, it was wracked by fighting between government forces and leftist guerrilla groups like the Revolutionary Armed Forces of Colombia, or FARC. Rightwing paramilitaries and violent drug cartels were also drawn into what became Latin America’s longest-running armed conflict.
But with the government intensifying its crackdown on FARC over the past decade, violence has subsided, with a sharp reduction in the number of kidnappings.
In recent months there has been an uptick in guerrilla attacks on pipelines and oilfields. But Colombian oil officials say the frequency of the raids declined after FARC and the government agreed last month to meet in Oslo in early October for their first talks in a decade.
The reduction in violence has coincided with government moves to open up the oil sector, such as the partial privatisation of Ecopetrol in 2007.
Since then, the state company’s fortunes have significantly improved, with its oil production virtually doubling from 400,000 barrels of oil equivalent a day in 2007 to about 750,000 boe/d this year. It plans to increase that to 1.3 boe/d by 2020, with the help of an $80bn investment programme.
Meanwhile, Ecopetrol’s market value has risen more than fourfold since its initial public offering in 2007. In May it briefly surpassed that of Brazil’s Petrobras, South America’s biggest oil producer. The Colombian government retains an 88.5 per cent stake in the company, with the rest publicly traded.
The liberalisation of the oil sector and the cooling of the armed conflict have stimulated the interest of western majors, who have been particularly drawn to Colombia’s vast deposits of “unconventionals” – shale oil and gas, oil sands and coal bed methane. Thirty-one of the blocks up for grabs in the latest exploration licensing round contain unconventional resources.
Attention has focused on the Middle Magdalena basin, which has already drawn comparisons with the huge Eagle Ford shale in the southern US and the vast Vaca Muerta (“Dead Cow”) shale in western Argentina
A report by consultancy Arthur D Little put Colombia’s recoverable shale gas reserves at 31.7tn cubic feet. Ecopetrol says it plans to be producing 50,000 boe/d of unconventionals by 2020.
Colombia has offered a number of incentives to investors in its shale gas reserves, such as a 40 per cent discount on royalty rates. The deadline for offers in the licensing round is mid-October, with awards expected in November and contracts signed by the end of the year.
ConocoPhillips confirmed it had been pre-qualified to participate in the oil leasing round. Shell said only that it had submitted a qualification to bid. Exxon declined to comment.
From The Financial Times