South America: Colombia

SOUTH AMERICA

Stuart Wilkinson, Contributing Editor

Colombia

The country is developing a more-attractive environment for foreign investment – especially in the oil industry, which accounts for about 4.5% of GDP and more than 20% of exports. GDP dropped 3% in 1999 in contrast to the preceding seven years, when GDP grew an average 3.8% per year. Early this year, President Andrés Pastrana announced the Colombia Plan, now accepted, where the U.S. will help to resolve insurgency and drug trafficking, as well as modernize legal and military institutions and strengthen the economy.

Exploration. Late last year, Ecopetrol signed a new exploration contract with partners Baker Hughes (70%) and Tecnopetrol (30%). The companies will spend $5 to $8 million on a block in César province. This contract is under a new sliding scale of royalty payments, approved mid-year, that allows private partners to receive a quicker return on investment.

Ecopetrol signed eight new E&P deals in January. Much of the acreage is located in the Middle and Upper Magdalena Valley and its Putumayo basin. Alberta Energy’s AEC Colombia won two Putumayo basin properties – the Rio Juanambu and Pacayaco contracts. Bráspetro grabbed the Bicudo contract in Casanare province. CanWest was awarded the Colón contract in Tolima province. La Luna Oil got the Guayacanes contract in the Middle Magdalena Valley.

Four more areas in the Upper Magdalena Valley were awarded to: IPC of Colombia for the Pijao area; CMS Oil and Gas for the Torbellino contract; CanWest, Petrocol and Petróleos Colombianos for the El Golfo contract; and Chilean Sipetrol (the international arm of state oil company Enap) with Clapsa (an affiliate of the Petroleum Company of Chile), for the Altamizal exploration contract with Ecopetrol. Oxy is expected to begin drilling the Gibraltar 1 exploration well in the Samore Block in October.

Development/drilling. Petrobrás Colombia Ltd. (operator) and partners CMS and Ecopetrol completed well Venganza 4H (horizontal), drilled in Matachin field, Espinal Block, Magdalena Valley basin. The well tested 7,000 bpd of 28°API oil. Three more horizontal wells are to be drilled in the Espinal Block during 2000.

Vanguard Oil recovered 18°API oil from the Mugrosa formation during a cased-hole drillstem test in Bukhara 1, Las Quinchas Block. Overall, Colombian drilling declined 23%. A 17% recovery is expected this year.

Production. Much-higher oil prices allowed the country to double its oil-export income in January despite a drop in export volume. Production during that month was about 750,000 bopd. Crude output for 1999, overall, was up 8.1% at 826,000 bpd. Gas production reached 503 MMcfgd, down 18% from 1999. Association contracts accounted for 96% of gas production.

The Emerald Energy PLC Gigante 1 well will be back in full production in September after a recent fire. Negotiations are underway for a rig to drill the first well, Guarataro 1, in the company’s 100%-owned Vuelta Larga Block in the Llanos basin.

A serious problem for state-owned Ecopetrol is the threat of having to begin oil imports as early as 2005. Short-term projects include incremental-production fields up for bid. Medium-term hopes rest with exploration areas up for bid, as well as with two, large-scale projects: BP Amoco’s Niscota project, which has potential oil reserves of 900 million bbl; and Occidental’s Samore Block.

Ecopetrol finalized a swap, whereby Oxy returned a portion of the Samore Block to settle a dispute with the U’wa Indians. In return, it received more-favorable contract conditions to explore on Gibraltar Block, which may harbor 1.4 billion bbl of oil.