Colombia bets on shale as peace talks open energy frontiers

Colombia, the fastest-growing major oil producer in Latin America in the past five years, is looking to join the global shale boom as it expands exploration in areas once dominated by guerrilla groups.

A unit of Exxon Mobil Corp. 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.

“The important thing is to get under way,” Orlando Cabrales, head of the National Hydrocarbons Agency, said in telephone interview yesterday. “Argentina is further 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 in crude has climbed after military strikes weakened the nation’s largest rebel movement, which is meeting this week in Oslo with government negotiators for talks aimed at ending an armed conflict in its fifth decade.

Lagging Reserves

Colombia is looking for new fuel sources, including methane trapped in coal beds, as oil discoveries fail to keep pace with output 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.”

A unit of Exxon Mobil as part of a group with Ecopetrol 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.

“We think there is a potential for unconventional in Colombia,” he said by telephone from Cartagena. “Fiscal terms are attractive and the issue of security has improved.”

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, Santos said. Ecopetrol has risen about 35 percent in Colombia’s stock market since Dec. 31.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome