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Colombia encourages Canadian oil interests
By Shaun Polczer
Calgary Herald
Calgary
Petroleumworld.com 06 13 06
Colombia is looking to Calgary to help it reverse a production decline that could see the oil-rich nation become a net importer by 2012.Although the security situation is improving, years of civil war and unrest have taken a toll on the country's oil infrastructure, Luis Ernesto Mejia, Colombia's minister of mines and energy told reporters Friday.
As a result, new discoveries have not kept pace with production, which slid from a peak of about 750,000 barrels per day (bpd) in 1999 to about 530,000 bpd last year.
Efforts to increase reserves have paid off somewhat, and the country has pushed back the date of self-sufficiency reckoning the point where internal consumption exceeds available supplies to 2012 from a previous estimate of 2009.
"Colombia is a country with oil, but it is not an oil country," Mejia said.
By applying Canadian technology to its oilfields and securing $1 billion US per year of direct foreign investment, Colombia hopes to increase production and stabilize it at 700,000 bpd by 2020.
The state oil company Ecopetrol had a banner year in 2005, with net earnings of about $1.4 billion.
Unlike fellow Latin American countries Venezuela and Bolivia, Colombia has never reneged on production contracts with international oil firms.
Instead of threats to nationalize petroleum interests, Colombia has courted foreign oil companies with royalty incentives.
"We're doing different things than our neighbours," Mejia said. "You have to look at the country itself and not what's going on in other parts of the region."
The biggest barrier to investment is Colombia's troubled political situation, characterized by large scale drug trafficking, assassinations of government officials and attacks on critical infrastructure such as pipelines and electrical facilities.
"We realize drugs have been the genesis of all our problems," Mejia said.
At least four revolutionary groups operate in the country, occupying both extremes of the political spectrum and displacing millions of people.
Signs of improvement have been slow to materialize, but the trends are encouraging.
Homicides fell to 18,000 in 2005 compared with 32,000 in 2002.
Kidnappings fell from 3,500 incidents in 2000 to about 173 in the first quarter of this year, and the government has been able to convince some 30,000 guerrillas to lay down their arms.
In a more positive light, Colombia enjoys Latin America's most robust economic growth, at about five per cent per year, along with the region's lowest inflation rate.
"That gap between perception and reality is a window of opportunity," Matthew Levin, Canada's Colombian ambassador said.
Canadian companies operating in Colombia include Nexen Energy, Enbridge and Talisman.
Smaller firms include Calgary-based Solana Resources and Petrobank Energy and Resources Ltd., which is going ahead with an initial public offering of its Colombian subsidiary, Petrominerales.
Petrominerales is presently producing about 3,000 bpd in Colombia and is one of the largest land holders with more than one million hectares under lease.
Petrobank president John Wright said the Petrominerales IPO should close this month.
The country offers smaller companies like his the opportunity to explore for world-class oil reserves, he added.
"We love it there," Wright said. "I think we fight way above our weight. Colombia as a place to do business is fantastic, it's always been great to us."
spolczer@theherald.canwest.com
Calgary Herald 12 06 06
Copyright © CanWest News Service 2006. All Rights Reserved.
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