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What We Saw at Colombia’s Ronda 2012 Bid Round


The president was a no show. As is often the case with heads of state, Colombia’s President Juan Manual Santos had a last minute change of plans. Minister of Defense Juan Carlos Pinzón came instead, entering the auditorium with at least a dozen armed soldiers. When in Cartagena it is hard to remember that in some respects Colombia is still a country at war. Ten years ago, there were armed soldiers on nearly every street corner. Today, the city is just another peaceful Caribbean destination.

Pinzón took office a year ago with the mission to deal FARC a final blow, and he spent the better part of an hour reassuring attendees of V Colombia Oil & Gas Investment Conference the Colombian army is making progress. The narco-terrorism group has stymied production, denying Colombia the 1 MMbo/d goal for more than a year. September production bounced from 918,000 to 956,000, indicating FARC is once again in retreat and the country may yet cross that threshold before 2012 comes to an end.

There is a joke in Colombia: Who will reach 1.5 MMbo/d first: Colombia or Venezuela? For those not in the know, the punch line is Venezuela is aiming for 3.5 MMbo/d, but keeps slipping instead. With the recent reelection of President Hugo Chavez, it is hard to see that trend reversing.

It Takes Money to Make Money

Despite all the progress Colombia has made, the country still needs big companies to make big investments. The mature Llanos Basin accounts for 70% of Colombia’s production and drew the lion’s share of the bids in Ronda 2012. But the big companies are coming back, and Shell, ExxonMobil, Anadarko, Statoil and Repsol all made bids for frontier acreage last week. In particular, Colombia sees its potential in two areas: the offshore and unconventionals. At the moment, there is more progress being made on the offshore front. An Ecopetrol spokesman at the conference couldn’t help but note that Equion’s Mapale-1, Colombia’s first offshore well in four years, has encountered hydrocarbons. Six of the 12 offshore blocks offered received bids, four drawing multiple offers. With its proven track record in frontier offshore basins, newcomer Anadarko in particular is considered quite a catch. Colombia’s Caribbean Plate is geologically complex and long thought to be gas prone, hosting Chevron’s Chuchupa field which is the country’s primary source of natural gas. But recent piston coring has revealed the area also has liquids. Only 50-some offshore wells have been drilled to date and Colombia is pushing for a multi-operator, multi-well drilling campaign to kick off in 2014. As one speaker put it, “It will be unlike anything Colombia has ever seen before.”

At first glance, the fact that just five of 31 unconventional blocks drew bids is discouraging. ANH director Orlando Cabrales felt compelled to note, “We are just beginning an accelerated learning curve.” He added, “I am certain we will get it right.” In Colombia, government cooperation is key, and in Ronda 2012 it offered special terms for blocks with unconventional potential, including a discount on royalties, adjusted windfalls profit tax and extended licenses. Speakers representing E&P companies offered further suggestions, including eliminating mandatory acreage relinquishments and extending terms to legacy contracts, confident the Colombians would listen. Shell, in noting that with shale plays geology is the final filter, said the company believes the La Luna shale is a very good bet. But then with its large Middle Magdalena Basin leasehold and aggressive exploratory drilling program planned for 2013, Shell had already made that clear.

Life of the Party

The conference ended with a party at the Castilla San Felipe de Barajas, the 16th century fortress that looms over Cartagena. Festivities were just getting started at midnight, guaranteeing a rough journey home for any number of attendees. Colombia relishes its reputation as a good host, and will be sponsoring the 2013 AAPG International Convention and Exposition next September. It hopes to break the attendance record set in Perth in 2006.

Speaking of attendance records, we would like to break our own at the Drillinginfo World Members Meeting, which starts tomorrow at the Hilton in Downtown Austin, Texas. Everything is coming together and it looks to be our best one yet. I would like to especially bring your attention to the International Insights track where I will be presenting, “Colombia: Building on a Decade of Success.” Other Drillinginfo International Regional Managers will discuss “Argentina Unconventionals: Looking Forward to the Second Stage”, “Australia: The Golden Age of Gas” and “Drillinginfo Around the Globe.” Online registration is closed, but there are still a few FREE seats left, so you can register in person at the hotel. We hope to see you there!

Now it’s your turn. How long do you think it will take Colombia to hit 1.5 MMbo/d? Please leave a comment below.

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