Colombia Aims to Put Caribbean Oil Exploration Back On Track

BOGOTA (Dow Jones Newswires), June 1, 2011

Colombia hopes it can resolve before the end of the year environmental issues that have delayed an offshore oil exploration plan in the Caribbean Sea by Spanish oil major Repsol and Colombia's state-controlled Ecopetrol.

Armando Zamora, the head of Colombia's oil licensing agency ANH, told reporters Wednesday that it and the two oil companies hope to reach an agreement with community leaders on the Colombia-owned island of San Andres that would allow for exploration contracts to be signed for the Cayos 1 and Cayos 5 blocks.

Nonetheless, the Colombian government official warned that without final consent from the San Andres island community--which is concerned about the effects on coral reefs and the fishing community--oil exploration in the area west of Nicaragua might prove impossible.

"We're aspiring for a deal to be reached during this year," Zamora said. "But both we the government and the companies don't want to force anything on the island communities. If in the end the communities say 'no,' then it's going to be very difficult" to continue with exploration plans.

The two oil blocks were awarded to Repsol and Ecopetrol last year in a drilling round aimed at boosting production in Colombia's already-booming oil sector. Crude oil output in Colombia reached a record 903,000 barrels a day in April and the government hopes production will reach 1 million barrels a day by the end of 2011.

Colombia has been hoping the waters it owns near San Andres, far from mainland Colombia, could allow it to become an offshore oil driller for the first time. Drilling near mainland Colombia has so far proven to be more gas-prone than oil-prone, although exploration efforts continue in several areas, including the Tayrona block held jointly by Repsol, Ecopetrol and Brazil's state-run company, Petrbras.

An official at Repsol in Bogota confirmed Wednesday that it hasn't yet signed a contract for either the Cayos 1 block or the Cayos 5 block, and he said that until that were to happen the company can't make any comments.

The oil blocks are located in the Seaflower Biosphere Reserve, a marine protected area that reportedly contains 76% of Colombia's coral reefs and is a nesting site for sea turtles. For more than a decade the reserve has been part of the United Nation's network of biosphere reserves.

The plan to begin exploration in the two oil blocks was suspended earlier this year after local groups filed a lawsuit against ANH for awarding the blocks within a protected area before consulting first with fishermen and others in the area that could be affected.

Zamora said the ANH hopes to convince the communities over the coming months that oil exploration would be done in an environmentally friendly fashion, and that the projects could bring jobs and improve the economies for the island of San Andres and Old Providence, a smaller island that is part of the same archipelago and is also owned by Colombia.

The Colombian official said it is too early to estimate how much oil might exist in the area.

Copyright (c) 2011 Dow Jones & Company, Inc.