Colombia Appears Offshore To Revitalize Its Oil Sector

Soon after an extremely hard 2020 and weak start to 2021 for Colombia’s oil industry, the country’s power ministry is betting on an offshore oil exploration growth to revive the economically critical hydrocarbon sector’s fortunes. A deficiency of major hydrocarbon discoveries for more than two-many years, coupled with a absence of proved petroleum reserves, are weighing greatly on Colombia’s financial state.

All those challenges are exacerbated by an rising domestic protection disaster, heightened political turmoil, nationwide anti-government protests and a near failed peace deal with Colombia’s major guerilla team the FARC. By bolstering petroleum exploration off Colombia’s Caribbean coastline, the government hopes to enhance hydrocarbon reserves and ultimately improve flagging crude oil and pure gasoline production.

This has grow to be a significantly urgent difficulty due to the fact of Colombia’s considerable economic dependence on crude oil and Bogota’s desperation to reactivate the economic climate immediately after a grueling 2020 where GDP shrank 6.8%. The anticipated enlargement of Colombia’s hydrocarbon reserves has failed to arise, irrespective of substantially of its territory opening to hydrocarbon exploration right after the summary of the peace accord concerning the countrywide government and the FARC in 2016. On 1 June 2021 Colombia’s Ministry of Mines and Energy declared (Spanish) that established oil reserves at the conclude of 2020 experienced fallen by 11% 12 months above 12 months to 1.8 billion barrels. These petroleum reserves, which have a meagre production existence of just more than 6 many years, are significantly lower than any of Colombia’s oil developing regional neighbors including Venezuela, Ecuador, Brazil of Guyana. Natural fuel reserves also declined, slipping 6.9% compared to 2019, to 2.95 trillion cubic feet.

This has sparked sizeable consternation in the administration of President Ivan Duque mainly because of Colombia’s financial and fiscal dependence on crude oil. Practically a 10 years back, Bogota experienced pinned its hopes on unconventional hydrocarbon exploration and output with Colombia approximated to have practically seven billion barrels of recoverable shale oil and 55 trillion cubic feet of shale gasoline. The introduction of hydraulic fracturing to Colombia has provoked considerable opposition. It has been basically stymied at each individual change with the Andean country’s Condition Council, its greatest administrative court, quickly banning the controversial hydrocarbon extraction approach in 2018 and all over again in 2019. Though fracking tasks are permitted and presently underway, the potential of unconventional hydrocarbon generation is remarkably uncertain. That is magnified by considerable group opposition and the oil industry’s deteriorating social license.

The substantial financial challenges connected with those people activities are magnified by Colombia’s faltering oil output. For the duration of May well 2021, average everyday oil manufacturing (Spanish) fell by 3.9% 12 months over calendar year to 703,478 barrels whilst all-natural gas output popped by a wholesome 3.4% to 970 million cubic toes day by day. As a end result, total hydrocarbon output of 870,770 barrels of oil equivalent per day was a worrying 2.6% lower compared to a year before.

Resource: Colombia Ministry of Mines and Vitality & U.S. EIA.

Most of that decrease can be attributed to recent anti-authorities protests where by road blockades compelled a lot of of Colombia’s onshore drillers to shutter operations all through Could 2021. Most of those blockades have been lifted and production has recommenced at the affected oilfields, boding perfectly for larger output throughout June 2021.

Nonetheless, the very poor confirmed reserve and declining oil output sees Bogota pinning its hopes on offshore hydrocarbon exploration to appeal to urgently needed international energy investment to reinvigorate the oil sector and boost reserves as perfectly as creation. As a end result, Colombia’s hydrocarbon regulator the Countrywide Hydrocarbon Agency (ANH – Spanish initials) in March this yr released (Spanish) the Andean country’s 2021 bid round. There are a overall of 32 blocks on offer you, of which 28 are available by the ANH and four nominated by business contributors. Of the blocks available, 23 are onshore and the remaining nine offshore together with acreage in the Choco onshore and Tumaco offshore frontier basins.

The 32 Blocks Available Bid Spherical 2021

Resource: ANH.

The ANH estimates that the merged recoverable hydrocarbon methods of the blocks on supply is 1.1 billion barrels of crude oil and nearly 1.3 trillion cubic ft of purely natural gasoline. All those substantial recoverable methods, along with Colombia’s deficiency of established hydrocarbon reserves, underscores the substantial worth of properly executing the auction. The most recent presentation from the regulator demonstrates that expressions of curiosity near on 31 August 2021, with proposals to be submitted by 26 November and counteroffers allowed up until eventually 7 December. The ANH will then award individuals blocks devoid of counteroffers by 17 December and people with counteroffers by 27 December 2021. The awarded contracts will have a 6-calendar year exploration interval and a 24-12 months manufacturing section.

Colombia’s offshore Caribbean is rapid getting to be a well-known place for international energy businesses. In early 2020, Shell acquired a 50% desire from Colombia’s nationwide oil corporation Ecopetrol in a few offshore Caribbean blocks Fuerte Sur, Purple Angel and COL-5, all of which are in the Sinu basin. Fuerte Sur is made up of the Kronos-1 nicely the place hydrocarbons were discovered in 2015 though the Gorgon-1 and Purple Angel discoveries are in the neighboring Purple Angel block. Shell became the operator of the blocks and is slated to drill an appraisal effectively in the place by the conclude of this year.

In a the latest Bloomberg interview Colombia’s Electricity Minister Diego Mesa said that Exxon, Repsol and Ecopetrol are scheduling to drill in Colombia’s offshore Caribbean during 2022. The rising popularity of Colombia’s offshore Caribbean oil basins is underscored by their sizeable hydrocarbon likely. It is approximated that there could be recoverable hydrocarbon assets of up to one billion barrels of crude oil and 12 trillion cubic ft of normal gasoline. Those figures indicate that any main discoveries in the region would give Colombia’s meagre oil and all-natural fuel reserves a stable raise, therefore boosting their production daily life even though allowing drillers to ramp-up generation. If that had been to come about it would provide Colombia substantial economic gains while reducing the sizeable dangers involved with lessen oil production.

By Matthew Smith for Oilprice.com

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