SEMANA/Hydrocarbons | 9/23/2008 12:00:00 AM
An oily future
With new finds, Colombia clears up a big worry: having oil self-sufficiency until at least 2015.
On Tuesday, September 16, the Minister of Mines and Energy, Hernán Martínez caused a stir when he announced that the English company Emerald Energy PLC had discovered oil in the town of La Macarena in the Meta department. At first it was speculated that this could mean an oil field of more than 100 million barrels, which would make it the most important discovery in the last decade. But now experts recognize that it is still too early to determine just how much reserves barrels there are in this site on the border between Meta and Caquetá (south of Bogotá).
Given recent events, it may be time for Colombia’s perception of oil to change, because many things have happened. While there is still much to be done, the advances that have been made in the industry should not be dismissed.
The reality is that the country has been discovering oil for four years now. According to figures by the National Agency of Hydrocarbons (ANH), today there are 87 new oil wells whose exact reserves are not known as a whole, but it is estimated that they could add 100 and 200 million barrels to national reserves.
Small wells add up. This is what the director of the ANH, Armando Zamora believes. Their policy is to not exclusively target large deposits, but also small and medium-sized ones. Results show that the country’s production has increased since it hit bottom in 2005, when it was producing an average of 525,000 barrels per day. Since then, output has increased because of new discoveries as well as higher productivity of existing wells.
In the first eight months of this year, average oil production was at 576,000 barrels per day. In August, the figures increased to 600,000 barrels, the highest level of 2008. The country today has more available oil than it had a couple of years ago.
The main implication of this is that Colombia will be self-sufficient until at least 2015 and probably beyond. In addition, a new measurement of the country’s reserves will take place, a sort of census to calculate the amount of oil that Colombia really has. Authorities hope that this new measurement of reserves will add considerably to the national crude stock, which will thereby put off the threat of undersupply and the need to import fuel.
The president of the Colombian Petroleum Association (ACP) Alejandro Martínez, agrees with those who are optimistic about the future saying, “We are on the right path. That they are beginning to produce these first finds is good news. However, we will have to wait to see if the new find is 100 million, because that would be significant.”
But the ACP, which groups the main oil companies which operate in the country, has one main worry: how much will oil companies be willing to pay to the Colombian state when crude prices drastically increase? For Martínez, if the government makes a bad decision, this could result in a reduction in investment.
The Colombian Minister of Mines has said that the decision has already been adopted and that they will apply a pricing scheme of pricing by ranges (30, 60, 90, 120 and 150 US dollars). When oil prices rise in each of those ranges, the government take will increase. However this only applies to new contracts which are signed in the future.
It is obviously premature to claim victory regarding oil. However, new policies have begun to show results and the situation today is quite different from that a couple of years ago. The outlook today is not so crude.