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Colombia to speed up oil & gas
exploration before transition

The fourth round of permanent acreage will offer 10 technical evaluation contracts and 20 exploration
and production contracts across two offshore and six onshore basins.

By Patricia Garip /Argus

Petroleumworld 11 23 2020

Colombia is racing to develop crude and natural gas as an anchor for short-term economic recovery and a vehicle to finance a long-term energy transition.

In a three-day conference sponsored by the Colombian oil chamber (ACP) that ended today, the National Hydrocarbons Agency (ANH) laid out an upstream strategy focused on a fourth permanent licensing round, a second round of unconventional pilot projects and offshore Caribbean natural gas exploration and development. Longer term, the agency is promoting new frontier areas such as the Pacific coast.

"The consensus is that hydrocarbons will continue to be important for the country's economic development, fiscal sustainability and energy security, with a more important role for natural gas as a transition fuel. Hydrocarbons will also play a role in financing that transition," ANH president Armando Zamora said today.

"The old paradigm of leaving something for future generations changes completely to a paradigm of what we don't exploit now will stay underground forever," he said.

The fourth round of permanent acreage will offer 10 technical evaluation contracts and 20 exploration and production contracts across two offshore and six onshore basins. Companies are still eligible to nominate additional acreage ahead of the auction scheduled for mid-2021.

The third round resulted in the award of four onshore blocks to two incumbent Canadian independent firms, Canacol with VIM 44 and VMM 47, and Parex with VIM 43 and Llanos 134. The four new contracts to be signed starting on 30 November represent some $40mn in investment.

The ANH is putting finishing touches on regulation for a second round of unconventional pilot projects. The first round earlier this month drew a sole offer from Colombia's state-controlled Ecopetrol for a Middle Magdalena Valley basin project. Private-sector companies including ExxonMobil and coal miner Drummond bowed out pending the roll-out of additional regulations , including the terms of evaluation at the end of the pilot period and the appointment of an evaluation committee.

Zamora said he expects "at least two more proposals" in the second unconventional round, scheduled to take place at the end of December or early January.

Caribbean gas play

Colombia is also making a big push to find more natural gas, with a focus on the offshore Caribbean. Despite previous gas discoveries at the Orca-1, Purple Angel, Kronos and Gorgon-1 wells, the offshore play has yet to be developed.

Colombia has progressed toward making the offshore play more competitive over the last seven years, Shell Colombia president Ana Duque said, citing effective industry dialogue and an improved regulatory and fiscal framework.

"There is still a lot of work to do. What are we going to do, for example, to guarantee that the gas we find offshore is brought onshore to the people who need it in a competitive way? The government should continue with these dialogues and see what other countries such as China have done in a successful way," Duque said.

Among the drivers of the gas play is residential demand to replace firewood for cooking.

Among Colombia's newcomers is Carlyle Group, which recently agreed to acquire US independent Occidental's onshore Colombia oil assets.

Former BP chief executive Tony Hayward, currently Carlyle Colombia executive chairman, emphasized the firm's strategy of focusing on low-cost, onshore and short-cycle assets. Occidental will retain its exploration assets in Colombia's gas-prone offshore Caribbean frontier, which Occidental chief executive Vicki Hollub has said have "enormous potential".

Colombia produced 751,400 b/d of crude in October, down by 15pc from October 2019, according to mines and energy ministry data.

Commercial natural gas output slipped by 7pc year on year to 1.03bn cf/d in October.




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