Colombia Could Create New Oil Bid System

Orlando Velandia, head of Colombia’s National Hydrocarbons Agency (ANH), speaks to Reuters in Bogota, Colombia July 23, 2018. REUTERS/Carlos Julio Martinez

(Reuters, Luis Jaime Acosta, 24.Jul.2018) – Colombia is preparing changes to its bidding process for oil areas in an effort to increase investment and find new reserves, the head of the oil regulator said, after repeated cancellations of its latest oil round.

The changes, including contracts adjusted to international crude price fluctuations and the chance for companies to propose exploration on land not yet on offer, will help attract spending and nearly double reserves to at least 10 years of consumption, Orlando Velandia of the National Hydrocarbons Agency (ANH) said.

“We’re looking to improve conditions for the country, to achieve competitiveness and motivate companies to make proposals about areas,” Velandia said in an interview on Monday.

The ANH in April postponed the deadline to receive offers for 15 onshore areas at its Sinu-San Jacinto auction until the second half of the year. It was the sixth time the round was delayed.

Colombia is the third Latin American country hosting oil auctions this year, after Mexico and Brazil. Its bidding round comes after a four-year pause when low oil prices stopped many Latin American countries from offering acreage.

Colombia has been awarding blocks to the highest bidder every two to three years, but bidding in the new system will privilege the first company that requests access to additional areas, Velandia said, likely improving the offers of other bidders.

“Once we evaluate the areas and they’re added to the map, companies can make offers in a continual competitive process,” Velandia said. Companies would no longer be required to outline planned investments or compensate the government if spending falls short, he added.

Colombia could offer at least 20 onshore and offshore Caribbean blocks with the changes, Velandia said.

Companies having problems with social protests or delays in environmental licensing could be offered alternative areas, he said.

Protests, along with pipeline bombings, are a major headache. State-run Ecopetrol lost some $100 million earlier this year because of blockades.

The country has 1.78 billion barrels of reserves, equivalent to about 5.7 years of consumption. Colombia produces about 860,000 barrels per day (bpd) of crude, half for export.

The proposed changes must be approved by the ANH’s directive counsel, which includes the ministers of energy and finance.

Changes not approved before Aug. 7 will go to the government of President-elect Ivan Duque, who has promised tax cuts, investment in Ecopetrol’s refineries and a crackdown on attacks by rebel groups.

Reporting by Luis Jaime Acosta; Writing by Julia Symmes Cobb; Editing by Helen Murphy and Richard Chang

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Author: ENERGY ANALYTICS INSTITUTE (EAI)

Energy Analytics Institute (EAI) is a Houston-based independent think-tank providing unbiased research, analysis, commentaries, opinions and breaking news related to the petroleum sectors in the Latin American and Caribbean regions.

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