Colombia Moves to Boost Offshore Oil Development

Colombia is hoping to attract international oil companies to help develop its offshore oil reserves, and will hold an auction for 97 tracts in both the Pacific and Atlantic in July 2014. Bloomberg reports that Royal Dutch Shell, ExxonMobil, and ConocoPhillips have all expressed interest in bidding.

Colombia has ramped up oil production since 2007 after years of stagnant levels of growth. It surpassed one million barrels per day (bpd) last year, and with the country only consuming 287,000 bpd, Colombia exports the remaining total. The Ministry of Mines and Energy projects it will increase production to 1.3 million bpd by 2020. Its success in increasing production came largely from major reforms of the oil sector. The state-owned oil company, Ecopetrol, was partially privatizing. The government offered tax breaks to energy companies, and opened up large territories for exploration. Private companies are allowed to own 100% of upstream activities, a reform that is particularly important for oil majors looking to invest.

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However, Colombia is not endowed with vast reserves like neighboring Venezuela. At current rates of production, Colombia’s 2.4 billion barrels of oil reserves will run out in seven years. With oil exports accounting for around 4% of government revenue, Colombia hopes to stem the tide of decline. That is leading them to look to unconventional oil and gas, as well as offshore. But, Colombia’ government feels it hasn’t done enough to attract drillers.

“Our current offshore position isn’t the most competitive; we’re working to improve it,” Javier Betancourt, head of Colombia’s oil agency, said in an interview, according to Bloomberg. “There’s a marked interest from the big players in Colombia’s unconventional and offshore.” Colombia is looking to sweeten the terms of their leases ahead of its July auction in order to attract increased investment. Royal Dutch Shell, ExxonMobil, and ConocoPhillips all declined to comment on the story.

By James Burgess of Oilprice.com