Colombia Heavy Oil: Regional Update

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With the July 23 closing date of its 2014 bid round fast approaching, Colombia is pushing hard for international investment in its offshore and unconventional plays. In fact, Colombia is placing heavy bets on these two frontier plays, with 19 offshore blocks (16 in the Caribbean and three in the Pacific) and another 19 deemed to have unconventional potential up for grabs in Ronda 2014.

One of the reasons Colombia is taking this long view is that while its production nearly doubled in the past decade, reserves remain stagnant at a stubborn seven years of supply. The reason is largely due to recent exploration netting relatively small discoveries in the mature Llanos Basin which in turn are brought online quickly. So moving beyond this scenario in order to boost reserves is at the top of the list of objectives, and Colombia sees the best path as the exploration of its frontier basins in hopes of a discovery of a giant field.

However, as any explorationists can attest, the flip side of high-reward frontier exploration is high risk, and both Colombia’s offshore and unconventionals are fraught with plenty. While its Caribbean waters have seen a remarkable upswing in leasing and seismic activity since Ronda 2012, the first deepwater well has yet to be spudded. Any discovery will have to pass the economics test to warrant development, and then it will be years if not decades away from first production. And, lest we forget, we are talking about the Caribbean here, an area best known as a tourist destination with fragile and beloved reefs and islands. In other words, a major oil and/or gas development would attract the attention of vigilant environmentalists.

The country’s unconventional plays face similar hurdles. The oil potential of the shales in the Middle Magdalena has drawn the likes of Shell, ExxonMobil and ConocoPhillips. But permitting along the Andean front has been excruciatingly slow, with Shell yet to secure a permit despite some two years of trying. And, assuming those permits start coming through and the needed volumes of hydrocarbons are confirmed, the obstacles for full-field unconventional development in this remote, yet-heavily populated, mountain region nearly defy imagination.

So, while Colombia’s potential on these two fronts tends to garner the headlines, the near-term future continues to be in the Llanos Basin, which is largely the domain of small independents, a disproportionate number of which are from Canada. Among them is Toronto-based Pacific Rubiales Energy, which thanks to its success on the heavy oil belt that extends from Venezuela to Ecuador right through the Llanos, is no longer all that small. Much of its management hails from Venezuela’s state oil company PDVSA, and therefore are experts in the extraction of heavy crude. Pacific Rubiales has put this knowledge to good use, in the process almost single-handedly driving Colombia’s production growth with its development of the Rubiales/Quifa heavy oil complex. The fly in the ointment, which is working to Colombia’s advantage, is Rubiales was actually discovered in 1981 and remained largely dormant until Pacific Rubiales came on the scene. Therefore, the two main leases – Rubiales and Piriri — expire in 2016. Pacific Rubiales maintains it is confident those leases will be renewed, but is clearly not banking on it. So the company has been aggressively exploring the flanks of the structure, and now maintains its Hamaca discovery on CPE-6 and Mochelo discovery on Rio Ariari are set to equal Rubiales/Quifa.

Colombia Heavy Oil: Regional Update

Those who watch Colombia are well aware of Pacific Rubiales’s progress. What is perhaps more newsworthy is that the company is not alone. In all, five operators have made about two dozen discoveries. Among them is Colombia’s state oil company Ecopetrol, which has declared its Cano Sur Este block, just west of Rubiales/Quifa, and CPO-9 some 200km to the west commercially viable. At CPO-9, the state oil company and its equal-partner Talisman are conducting long-term production tests on nine of the 10 wells drilled on the Akacias discovery. The current yield is an average of 10,500 bo/d. In all, some 2.8 million barrels have been produced from the long-term tests. Ecopetrol’s Akacias-1 well has been in production for more than 1,100 days. In March 2014, Ecopetrol submitted a full field development plan for the discovery, which has original oil in place of around 2.5 billion barrels (best estimate). Future plans for the Akacias discovery envision some 50 development wells pumping heavy oil to supply a 50,000 bo/d processing facility. But CPO-9’s story doesn’t end at Akacias. According to Talisman, the block has multiple prospects with potential similar to Akacias. And, Ecopetrol has made another three heavy oil discoveries on the adjacent CPO-10 to the east: Guainiz-1, Cusuco-1 and Pastinaca-1.

Colombia Heavy Oil: Regional Update

In fact, Ecopetrol and its subsidiary Hocol have made more than a dozen heavy oil discoveries in this wide swath between Rubiales/Quifa and the Andean front more than 200km to the west and southwest. And, Ecopetrol/Hocol and Pacific Rubiales are not alone. Tecpetrol has made discoveries on CPO-6, CPO-7 and CPO-13 west and northwest of Rubiales/Quifa, while Pluspetrol has been conducting a stratigraphic drilling campaign on its vast CPE-7 TEA to the south.

Colombia Heavy Oil: Regional Update

The southern extent of the Llanos Basin heavy oil trend is probably AMA-4, which Ecopetrol and Hocol picked up with a bid of US$ 43.7 million (second highest at Ronda 2012), but there is still the less-explored northeastern extension which runs from Rubiales/Quifa more than 400km to the Venezuelan border. And, the heavy oil trend continues to the southwest, picking up again in the Caguan-Putumayo Basin in southern Colombia. With its eye ever toward the future, Pacific Rubiales has been building up a leasehold on that front.

So, while Colombia continues to court operators large enough to bet on the offshore and unconventionals, near-term production and reserve growth will almost certainly be in the form of more heavy crude.

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Anne Leonard

In January 2015, Anne Leonard headed the team that launched the latest addition to DrillingInfo’s international publications, International Scout Frontier North America which covers the US Gulf of Mexico as well as Maritime and Arctic Canada. She has been reporting on exploration and production for more than 30 years. She began her career in Denver covering the Rocky Mountain Region, and has spent the last 10 years covering the international arena, with a particular focus on Latin America, Africa, Western Europe and the Far East. Anne received her Bachelor of Arts in Journalism from the University of Nebraska.