Fracking Could Revive Colombia's Oil and Gas Game



Fracking Could Revive Colombia's Oil and Gas Game
Fracking could give Colombia's oil industry a new lease on life.

Latin American states like Colombia have been important producers of oil and gas for this southern continent, the Caribbean and North American markets. Colombia’s crude oil production is primarily located onshore, in the northwest and centre of the country, close to major refined product-consuming regions.  Meta Department, in central Colombia, is an important production area, producing predominately heavy crude oil. The area’s Llanos Basin contains the Rubiales oilfield, the largest producing oil field in the country.

“Today we produce 900,000 barrels of oil, we use about 400,000 barrels for domestic use and for that we have reserves for six years,” states Oil and Mining Minister, Maria Fernanda Suarez. Additionally, “about 500,000 barrels are exported and bring in dollars,” said Suarez. In fact, oil accounts for about half of the country’s legitimate exports and is one of the main sources of revenue for the government in Bogota.

However, there have been no major oil or gas discoveries since 2009 which has prompted the government to look towards allowing fracking in its ageing oil and gas fields to boost output and maintain long-term self-sufficiency. Fracking could give the industry a new lease on life. Minister Suarez estimates that fracking in existing fields could increase Colombia’s oil reserves currently put at  5.7 years to 11 years -- and gas, from 15 to 30 years.

Leading energy firms with fracking expertise including ExxonMobil, Conoco Phillips, Parex and Ecopetrol have expressed their interest in starting pilot fracking projects. Francisco Lloreda, the head of the private sector Colombia Petroleum Association, explains that  “in the first phase of the four pilots they will require investments of around $600 million per year -- so we’ll surely have two, even up to three years, with investment of that amount and once we pass to the production phase they will require investments of around $5 billion per year.”

Potential target areas for fracking include Valle Medio del Magdalena, Valle Superior del Magdalena, Caguán-Putumayo, Catatumbo, Cordillera Oriental, Cesar-Ranchería, La Guajira and Llanos Orientales.

Ecopetrol

Felipe Bayon, chief executive of Colombia’s state-run oil company Ecopetrol, has announced plans to start fracking pilot projects in the second half of 2020 after gaining federal regulatory guidelines. In anticipation of receiving the government’s green light, Ecopetrol has gained fracking expertise and experience in Texas’ Permian Basin, in a joint venture with Occidental Petroleum Corp. Furthermore, Ecopetrol has said it will invest $500 million for exploration of non-conventional deposits between 2019 and 2021, and establish a Directorate of Non-conventional Hydrocarbons within its corporate structure to direct its intentions in the field.

Once the long-awaited environmental approval from the National Authority for Environmental Licences is received, the company’s first pilot project is expected to be in the Valle Medio del Magdalena, in the Northern part of the country’s Andean mountain chain. Already, this region is a leading producer of oil embracing major fields such as Yariguí-Cantagallo, Moriche, Casabe, La Cira-Infantas, Velásquez, Santos, Palagua, Teca, Payoa and Lisama.

Obstacles

Ongoing opposition from local communities, environmentalists and some indigenous groups alongside slow-moving development of constitutional, political and regulatory frameworks has delayed approvals and stalled the start of pilot fracking projects. Nonetheless, this has not stopped the four companies from continuing  development of the technical and design elements of the fracking pilots.

However, new development of the country’s oil and gas resources is considerably threatened by violent ongoing attacks by members of the local National Liberation Army (ELN) and undermined by rampant corruption and legal instability.

In sum, if the government could end the political and regulatory uncertainty and curb both civil violence and corruption there could be a rosy future for fracking in Colombia.



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