A unit of Exxon Mobil Corp. (XOM) and state-controlled Ecopetrol SA were winners yesterday in the country’s first auction aimed at drawing investment in oil and natural gas found in shale rock formations. Colombia, which has yet to produce so-called unconventional energy, wants to increase such reserves to 1 billion barrels in the next two decades.
Colombia Bets on Shale as Peace Talks Open Energy Frontiers
Ecopetrol has risen about 35 percent in Colombia’s stock market since Dec. 31.
Ecopetrol has risen about 35 percent in Colombia’s stock market since Dec. 31. Photographer: Paul Smith/Bloomberg
“The important thing is to get under way,” Orlando Cabrales, head of the National Hydrocarbons Agency, said in telephone interview yesterday. “Argentina is farther ahead and Mexico is starting to move.”
Colombia is taking aim at unconventional fuels after oil production jumped 72 percent since 2007, allowing the nation to surpass Argentina to become the fourth-largest supplier in Latin America after Brazil, Mexico and Venezuela.
International investment also has climbed after military strikes weakened the nation’s largest guerrilla movement, which began peace talks with the government this week in Oslo in a bid to end an armed conflict in its fifth decade.
Colombia is looking for new fuel sources, including methane trapped in coal beds, as oil discoveries fail to keep pace with production gains. Colombia’s reserves of about 2.3 billion barrels equal almost seven years of output, lagging behind smaller producers Ecuador and Argentina, U.S. government data show.
“Ten years is like the minimum” level necessary, Cabrales said. “We need to increase the reserves.”
Highest Bids
A unit of Exxon Mobil as part of a group with Ecopetrol (ECOPETL) made the highest bids for three onshore blocks yesterday, including two that may hold shale oil, according to Julian Santos, a manager of public and government affairs for Exxon in the Andean region.
Earlier this year Exxon Mobil, whose shares have gained about 10 percent in 2012, took a share in a block that also may hold shale oil, he said by telephone. Ecopetrol has risen about 35 percent in Colombia’s stock market since Dec. 31.
The final list of companies awarded blocks will be published by the government next month. Some blocks sparked competing offers while others, including some unconventional blocks, had no bidders.
The government will gather more data about unconventional blocks after a lack of information probably deterred bids, Cabrales said. The government received bids for five unconventional areas out of offers for a total of 49 blocks that will together draw $2.6 billion in spending on exploration, according to the agency.
Peace Talks
The government is auctioning the blocks as it begins talks with the Revolutionary Armed Forces of Colombia. Rising rebel sabotage of pipelines this year prompted Ecopetrol, which funnels revenue to government coffers, to cut its 2012 output target to 780,000 barrels of oil a day from 800,000 barrels.
While attacks on energy infrastructure have declined from a decade ago, assaults increased this year as rebels targeted pipelines and transmission lines. Sabotage of infrastructure more than tripled to 123 incidents in the first nine months of the year from 37 a year earlier, as total terrorist acts jumped 55 percent, according to Defense Ministry figures.
Colombia expects to produce more than 1 million barrels a day of crude at the end of December, Energy and Mines Minister Federico Renjifo said last week. Output was 956,300 barrels a day in September.
Ecuador and Argentina surpass Colombia in crude reserves, with 6.5 billion barrels and 2.5 billion barrels, respectively, according to figures from the U.S. Energy Information Administration.