Colombia Plans to Auction New Pacific Oil Blocks in 2009

LONDON, April 3, 2008 (Dow Jones Newswires)

Colombia, currently in the middle of a new oil licensing round, is preparing to auction off additional acreage next year on the country's Pacific coast as it seeks to ramp up oil exploration and production long stymied by the country's civil conflict.

So far, Colombia's crude oil production has been concentrated elsewhere in the country, but industry analysts say the area along its Pacific coast could hold significant potential, especially offshore.

"In the Pacific region...we are finishing studies to hold an auction next year," said Armando Zamora, chief of the ANH oil licensing agency told Dow Jones Newswires in an interview. "It would still be is an area of about 10 blocks."

"It's very frontier," he said, describing the area as remote, difficult to access, and technically challenging.

"It would have to be (for) companies that have a good appetite for risk and a good capacity to make important investments," he said. "But our studies show that (the area) could end up being very prospective."

This year, Colombia plans to auction a total of 151 blocks. In the current round for 48 blocks, it has received interest from Chevron Corp., Royal Dutch Shell PLC, Exxon Mobil Corp. and Russia's Lukoil Holdings, as well as companies from Japan, Korea and Argentina, Zamora said.

Colombia has emerged as an increasingly attractive option in the region as neighboring producers like Venezuela, Ecuador and Bolivia have rewritten contracts to impose tighter terms on foreign oil companies. In contrast, Colombia enjoys a reputation for strong contractual stability and favorable terms, including royalties as low as 8%.

After decades of kidnappings and attacks by rebel groups on oil infrastructure, Colombia's security situation has also improved under President Alvaro Uribe, which has helped to revive investment in the industry.

Total investment in the oil and gas sector is now expected to rise to $8.5 billion a year in 2008, Zamora said.

"Ecopetrol alone has investment plans of $3.5 billion," Zamora said.

With foreign investment expected to reach $5 billion in 2008, total investment "could exceed $8.5 billion," he said.

Colombia, which currently produces about 550,00 barrels a day of which roughly half is exported, is seeking to lift domestic output to 1 million barrels a day of oil equivalent by 2020 and raise the proportion it exports, he said.

LONDON, April 3, 2008 (Dow Jones Newswires)