Colombia Could Assist, Benefit From Venezuela Oil Recovery: Former Minister

(S&P Global Platts, 10.Apr.2019) — Colombia could use its oil expertise to assist in, and benefit from, the secondary recovery of Venezuela’s heavy crude production, Colombia’s former energy minister said Wednesday.

Colombia has a crop of heavy oil fields that contribute to its own 900,000 b/d of current oil production, Mauricio Cardenas said on the sidelines of the Columbia Global Energy Summit in New York.

“Colombia would be in a strong position to benefit from an oil recovery in Venezuela,” said Cardenas, who was the country’s energy minister in 2012.

The annual gathering is sponsored by Columbia University’s Center on Global Energy Policy, where Cardenas is a distinguished visiting fellow.

Colombia would be able to participate after regime change in Venezuela, he said.

Nicolas Maduro, who ruled the country since 2013, has grappled with a major recession and currency devaluation, leading to social chaos. Opposition leader Juan Guaido has declared himself interim president and is now widely recognized internationally, including by the US, as the country’s leader.

Some analysts have said a Venezuela oil production recovery would take billions of dollars in foreign investment, but that would be nearly impossible without significant changes to Venezuela’s Chavez-era hydrocarbons law, which severely limited stakes private companies could hold in oil projects.

Guaido has pledged to revamp the law, but has not outlined any concrete proposals.

Presumably, Colombia could participate via state-led Ecopetrol, which has “lots of cash flow, is a very profitable company and has the expertise Venezuela needs at this point for secondary recovery of very mature fields and especially with heavy oil,” Cardenas said.

Venezuela’s oil production has fallen to 960,000 b/d, down from more than 3 million b/d in 1998. S&P Global Platts Analytics expects Venezuela crude production to fall to 675,000 b/d by December 2020.

REVIVING OFFSHORE IN CARIBBEAN

In addition, Colombia is reviving its offshore, which, according to Cardenas, has produced natural gas “for decades” under a joint venture with Chevron in the Caribbean area, but has not had any oil production.

Anadarko has some offshore finds in the country. In 2015, it discovered the Kronos gas discovery, also in the Caribbean, while in early 2017 a second discovery, Purple Angel, was made three miles north of Kronos.

More recently, Colombia’s National Hydrocarbons Agency, or ANH, earlier this month signed two offshore explorations deals with both Repsol and ExxonMobil for one block and Repsol and Ecopetrol for another block. ANH has also signed two exploratory deals with Shell in March. All blocks are sited in Colombia’s Caribbean territorial waters.

“Prospects are good,” Cardenas said. “There are a number of wells that are going to be drilled in the next couple of years, some of them very technologically challenging, in very deep waters.”

SHALE POTENTIAL ENCOURAGING

In addition, Colombia’s shale potential for tight oil and gas is also encouraging, he said. The government recently released a report giving the green light for pilot wells in the Middle Magdalena Valley, which will probably be carried out through a joint venture between Ecopetrol and large foreign companies experienced in unconventional production.

Cardenas named ExxonMobil and ConocoPhillips as likely candidates to carry out that development. ExxonMobil recently said it plans to raise its Permian Basin production to 1 million boe/d by 2024, up by 80% from current output in the West Texas and New Mexico basin.

ConocoPhillips also produced 335,000 boe/d of unconventional oil and gas from US plays in fourth-quarter 2018, with the Eagle Ford Shale in South Texas accounting for 60% of volumes. The company also has production in the Permian and the Bakken Shale in North Dakota and Montana.

Ecopetrol’s 2019-2021 business plan calls for investment of $500 million to develop shale pilot projects, starting with 20 test wells, Felipe Bayon, the company’s CEO, has said.

Colombia has about 2 billion barrels of oil equivalent reserves, an amount Cardenas said represents only about seven years’ worth of production, but shale could add another 7 billion boe on top of that.

Platts Analytics currently shows Colombia crude production rising to roughly 926,000 b/d in 2020 from 865,800 b/d in 2018, before slipping back below 900,000 b/d by 2024.

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