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Colombia’s Sea of Opportunity

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Colombia’s underexplored offshore is getting a much-needed jolt of investor confidence.

Speaking on the sidelines of the Offshore Technology Conference in Houston in early May, Colombia’s Luis Miguel Morelli, who heads the Agencia de Hidrocarburos (ANH), told a Drillinginfo analyst that two exploration ventures are being planned for the 2020 wildcatting season. “Next year is going to be important,” he said.

One of the contracts slated to see drilling is the result of the ANH swapping older Technical Evaluation Contracts (TEA) for new E&P agreements. This is part of a pro-investment strategy in which the new agreements aim to help the country increase production and reserves.

Colombia produced on average 865,000 bo/d in 2018. The South American nation briefly harvested more than 1 million bo/d in 2015 before the drop in global oil prices sideswiped the industry (Figure 1). Bogotá wants to break through that barrier once more in the coming years.

Figure 1. Colombian Oil and Gas Production 1995-2018

 

Regulators are Sewing Up New Offshore Contracts

Colombia now stands a chance to break that barrier.

Even before the ink dried on Shell’s newly minted GUA OFF-3 and COL-3 E&P contracts in March 2019, U.S.-based Noble Energy swooped in, acquiring 40 percent and operatorship of the blocks. Both contracts require investment commitments of more than US$ 100 million during the first exploration phase. Noble is understood to be looking for a “liquids play” with its planned well. Noble has not specified which block it will drill, though both tracts are covered by seismic.

Elsewhere in the offshore, in 2020, Petrobras and Ecopetrol are looking to drill a well, which one source called Uchuva in the offshore Tayrona Block. Uchuva is succulent fruit found in Colombia. While the well is expected to spud in 2020, Petrobras has not confirmed the naming of the planned well, and the NFW’s nomenclature could change.

This planned well is important because the Petrobras-operated Caribbean tract is host to the Orca-1 deepwater discovery. Orca-1, in early December 2014, encountered a natural gas column at a depth of 3,657m (Figure 2). The well had primary targets in the early Miocene carbonate platform of the Siamana Formation and Oligocene carbonate units. Partners are looking at options to bring the gas to shore via sea-to-shore pipelines. Petrobras and Ecopetrol’s WI in the block is 44.44 percent and 55.56 percent, respectively.

Figure 2. Offshore E&P Tayrona License is highlighted in red. Post 2010 NFW’s and results. Colombian Chuchupa gas field (red) and Venezuelan Perla gas condensate field (orange) *

Besides the Noble contract and Shell’s GUA OFF-3 and COL-3 E&P contracts, Ecopetrol signed a contract for COL-5 on March 1. As part of the Minimum Exploratory Program, the company will drill two exploratory wells in the block where it recently secured E&P rights to the former COL-5 TEA. Ecopetrol holds 100 percent WI in the COL-5 Block and is seeking partners ahead of seismic and drilling.

Repsol has also signed two contracts — COL-4 in conjunction with ExxonMobil (50:50 WI split) and GUA OFF-1 in conjunction with Ecopetrol (50:50 WI split). Repsol is operator of both COL-4 and GUA OFF-1. The agreements were signed in April.

The ANH’s Morelli expressed optimism that the four remaining offshore Colombian TEA’s —  COL-1, COL-2, COL-6, and COL-7, which are wholly owned by Anadarko, will be signed soon.

Occidental Petroleum (Oxy) is buying Anadarko after former rival Chevron bowed out of a bidding war for the company. Oxy’s merger agreement with Anadarko carries a US$ 57 billion price tag. Oxy has stake in the onshore blocks LLA-39, LLA-52, Teca Cocorna, and La Cira Infantas, along with interest in the Llanos Basin’s Cravo Norte, Chipiron, Cosecha, and Rondon through the Oxy and Repsol joint ventrue, OxyCol. While in the Caguan-Putumayo Basin, Oxy is farming in for 50 percent in Amerisur’s Tacacho, Terecay, PUT-9, and Mecaya blocks (Figure 3).

Figure 3. Oxy’s onshore Colombia assets, current (purple), pending farm-in (blue) *

 

Missed Chances

Repsol’s Siluro-1 NFW on the RC-11 Block in the Guajira Offshore Basin, failed to find any commercial hydrocarbons in 2017. The NFW was drilled with the “Maersk Developer” semi-submersible. Repsol operated the RC-11 Block with 50 percent WI. Ecopetrol held the balance.

Separately, Ecopetrol’s Molusco-1 on the RC-9 Block, successfully reached TD of around 1,868m in late 2017, but likewise, this well failed to make a discovery.

That’s not to say that the Caribbean Sea has failed to yield a treasure trove. Then-50/50 partners Anadarko and Ecopetrol detected hydrocarbon accumulations in the 2016 Gorgon-1 (Purple Angel Block), 2017 Purple Angel-1 (Purple Angel Block), 2015 Kronos-1 (Fuerte Sur Block), and the 2015 Calasu-1 (Fuerte Norte Block).

While the wells were deemed noncommercial at the time, sources close to Ecopetrol, which now operates the contracts with 100 percent after Anadarko’s exit, believe the offshore areas could hold substantial volumes of natural gas (Figure 4).

That could help Colombia cover future energy needs. Bogota is hoping to develop more offshore oil and natural gas production in the coming years to help fuel its economy.

Figure 4. Offshore E&P Purple Angel License highlighted in red. Post 2010 NFW’s and results*

 

Looking for New Fuel for The Economy

Columbia needs the fuel as it braces for a shortage.

Colombia has one offshore asset producing natural gas — The Chuchupa-Ballenas project, which is jointly operated by Chevron and Ecopetrol.

The South American nation may have to import LNG if new gas reserves are not discovered by 2023, according to the Minister of Mines and Energy, Maria Fernanda Suarez.

“Projections show that if we do not find new sources in 2021-2023, we may need imported gas to supply the demand for residential gas in some areas of the country, at a price of more than twice the internal cost,” Fernanda Suarez said.

In 2018, natural gas reserves fell by 2.9 percent, to 3.78 Tcf. The country has added 272 Bcf to proven reserves due to reclassification of resources and discoveries of about 34 Bcf.

The South American nation’s last tender — Ronda 2014 — took place in Cartagena in July 2014. Low oil prices dampened optimism for another round, but the ANH has laid out a new licensing map with its Permanent Process of Assignment of Areas, or PPAA (formerly known as the Permanent Competitive Procedure 2018).

The PPAA bidding process focuses on nomination (by qualified companies) for open acreage, and then bidding tranches throughout 2019 for the nominated blocks. The process was formally launched in February 2019, along with draft terms of the model contracts and a draft timeline. The current list the ANH published includes 20 blocks which are part of the first phase of the bidding process. Thirteen of these blocks are located in the Llanos Basin, five in the Magdalena Valley, and two offshore in the Caribbean (GUA OFF-10 and SIN OFF-9). “We hope to close 2019 with more than 20 new contracts signed,” said one ANH source.

*These maps are not an authority on international boundaries.

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Tom Liskey