Colombia sitting on big oil reserves
Ed Crooks in London, Financial Times , 02 Apr 2008View original article
Colombia’s heavy oil area could hold 20bn barrels of recoverable resources, giving the country greater reserves than leading producers such as Mexico and Algeria, said its natural resources agency.
Foreign investment in Colombia’s oil and gas industry is booming, and the country hopes to lift oil production to 1m barrels a day in the next decade, from about 550,000 b/d currently.
Colombia’s heavy oil potential is dwarfed by that of its neighbour Venezuela, which is estimated to have at least 240bn barrels recoverable in its Orinoco belt region. But Colombia has the great advantage of welcoming foreign investment.
It is one of the few countries with significant resources becoming more accessible to international companies, and capable of growth in oil exports.
The ANH, Colombia’s national hydrocarbons agency, is on Wednesday setting out details of Colombia’s second licensing round in London, following presentations in Houston last week.
Larger companies have been invited to bid for heavy oil exploration acreage in the Llanos Basin, towards the border with Venezuela. ExxonMobil and Chevron of the US, Royal Dutch Shell and Lukoil of Russia have expressed interest.
The estimate of recoverable heavy oil comes from a study by Halliburton, the oil services group, which suggested there were 100bn barrels in place, and a typical recovery factor of 20 per cent.
Halliburton also suggested Colombia could have more than 50,000bn cubic feet of gas, about as much as Canada or the Netherlands.
David Thomson of Wood Mackenzie, the consultancy, said he thought the estimate of recoverable heavy oil was “probably on the hopeful side, but by no means impossible”.
“Colombia is not like Venezuela, Bolivia or Ecuador, which have all been pursuing unfriendly policies towards business, and its geology is also relatively easy, so it is attractive.”
Armando Zamora, director-general of the ANH, told the Financial Times he thought Colombia was now the most popular country in Latin America for foreign investment in oil and gas production. That investment rose from $1.8bn in 2006 to $3.5bn last year, and is expected to be close to $5bn (€3.2bn, £2.5bn) this year.
Mr Zamora acknowledged that in the areas being offered for heavy oil there were security concerns because of possible attacks by Farc rebels, which he said took refuge in bases across the border in Venezuela, and there would be a need for the government to deploy additional troops “to be on the safe side”.
However, Farc activity had declined sharply.
He would reassure potential investors about the tension between Colombia and its neighbours Venezuela and Ecuador. “There is no chance we would start a war with them,” he said.
COLOMBIA SITTING ON BIG OIL RESERVES reported April 2008
Big oil reserves but big problems to extract them
It all depends on how you define reserves – actually how you define the 20 billion barrels proposed by Halliburton. If this huge volume includes all the heavy and extra-heavy oils that may ultimately be produced over the next 500 years or so then perhaps such numbers are realistic. However large reserves numbers relayed by ANH, Colombia’s national hydrocarbons agency, whose aim is to set out details of a Colombian licensing round, must be taken in context. Especially when the numbers are conflated with a target output hoped for over a period of just a decade. It takes many years to develop heavy oil reserves even in accessible areas.
Colombia has been producing modest volumes of heavy oil, defined as having an API gravity of 22 degrees or less, since at least 1945 and has been producing lighter oils since 1921. Output has been erratic, largely due to the remote and difficult location in which much of the oil is located, both geographically and geologically. A pronounced peak in output in 1999 was due to a combination of just three light oil fields (Cano Limon, Cusiana and Cupiaga in the Llanos Basin) all reaching maximum output at around the same time. No other light oil fields of this magnitude have ever been found, although over 200 smaller fields are also producing in the country.
Attached is a chart that provides one simple forecast for Colombian heavy and light oil production. Of course it assumes the most likely case that no new giant light oil fields will be located - perhaps that may be arguable. Also the years after 2020 are speculative, depending on many factors beyond just the geology of Colombia. The chart does show how investment in many heavy oil developments will realistically lead to increased total oil output, albeit with exceptional growth in production through the next five years. However it will be very difficult to meet a volume close to the million barrels per day target hoped for by Ecopetrol for 2020 whilst light oil production continues to decline. Furthermore most of the new oil will be much heavier than that already being produced. Perhaps a 740,000 bbls per day target for 2015, as reported by ANH elsewhere, is achievable with massive investment in drilling, but 1 million barrels per day by 2020 seems very unlikely. As a guide the volume of oil produced over the period from 2008 to 2050 in the chart below corresponds to a little over 6 billion barrels, approximately equal to the entire volume of oil produced by Colombia in the 86 years since 1921.
Dr Michael R. Smith – www.energyfiles.com