South America: Colombia

SOUTH AMERICA

Stuart Wilkinson, Contributing Editor

Colombia

Economic growth should improve to 3.8% this year, after only 2.8% in 2000. Inflation should drop slightly to 8% this year, but 20% unemployment will likely contribute to social unrest.

Although peace talks are continuing, the civil war has worsened. Pipeline bombings escalated to 109 in the first half of this year, while crude production and exports fell 21% and 29%, respectively. About 127 Oxy employees were kidnapped for a few days in April, with about 100 subsequently freed. A Scotsman, working for Weatherford, was held for nearly two years before being released this July. For its part, the government arrested 57 suspects in the kidnapping of eight oil field workers, in which an American was killed. About 3,700 kidnappings occurred last year.

The president of state-owned Ecopetrol said that most of the upcoming exploration wells in seven areas – guerilla strongholds in the east and northeast – would be drilled, but rebels may prevent testing. Due to increased attacks, Harken Energy said that it was re-evaluating its Colombian operations, but not exiting the country.

Exploration. Since January 2000, some 54 new exploration or production contracts have been signed, with 20 inked this year. The government also plans a tender for 16.5 million acres in Caribbean waters.

In September 2000, Petrobrás, Braspetro and Canadian Petroleum signed two association contracts with Ecopetrol. The three will explore the Los Cuarzos Block, which covers 250,000 acres in Casanare province. Petrobrás and Canadian Petroleum also signed a contract for the 90,000-acre El Descanso Block in Upper Magdalena basin, Cundinamarca province.

Five exploration pacts in the Catatumbo River Valley, and in the Upper and Lower Magdalena River Valleys were signed with the Saudi-Colombian consortium Hocol, Canada’s Talisman and the Spanish-Colombian joint venture Cepsa Tex Star.

Oxy tried to settle its dispute with the U’wa Indians by relinquishing a major portion of its Samore exploration concession, thus remaining off Indian property. The government expanded the U’wa reservation to 850 sq. mi from 268 sq. mi. While the problem is not fully resolved, Oxy’s Gibraltar 1 exploration well should soon reach its targeted 14,300-ft TD.

Drilling / development. Seven Seas Petroleum announced this May, that it had started drilling the El Segundo 5-South well, with a targeted depth of 8,230 ft. The well is the first of a two-year, nine-well development program in Guaduas field.

Eight incremental production deals were awarded to Canada’s Alberta Energy; Spain’s Cepsa; the Colombian-Russian firm, Colombian Energy; Kappa Ranpetrol; and Imocol, a private company. The fields are located mainly in Santander and North Santander provinces, and in the southern provinces of Tolima Huila and Putamayo.

Two further association contracts were signed with UK-based Emerald Energy for work on the Campo Alegre and Capote Blocks. Canadian independent Nexen, previously known as Canadian Oxy, will spend $50 million this year in four Upper Magdalena Valley blocks for exploration and other work. Two to four delineation wells will be drilled on the producing Boquerón Block, which contains the 200-million-bbl Guando discovery. Petrobrás (operator) teamed up with Nexen on Guando, which is producing about 1,000 bopd. Nexen (this time as operator) and 50% partner Petrobrás also signed an associate contract last year for the El Descanso Block.

Production. A law that lowered royalties to 5% from 20% on fields producing less than 125,000 bopd went into effect last year, but it was subsequently ruled unconstitutional. The high court gave the legislature a year to rewrite the law.

At the end of last year, Ecopetrol confirmed that one of its oil fields and three fields in the Llanos basin have halted production, owing to extortion from local guerrilla groups.

Investment of $620 million over the next six years should allow Colombia to add at least 100,000 bopd in production to the current 500,000 – 650,000-bopd range (depending on bombings), thereby remaining an oil exporter until 2007. Ecopetrol’s principal goal is to raise oil production to 1 million bpd by 2010. Gas output averaged 639.1 MMcfd in May of this year.