Colombia reviews exploration contract conditions

Apr 22, 1997 02:00 AM

Colombian state oil company Ecopetrol has devised new ways of attracting fresh foreign oil investment to boost sagging exploration activity, company president Antonio Urdinola said. "Colombian oil production is expected to peak at 1 million bpd by 2000 but after that if nothing important is found production will fall and exports will disappear by 2006," Urdinola told.
Ecopetrol's current sliding scale upstream contract, despite some revision two years ago, had attracted investors only to large low-risk developments, Urdinola said. He said smaller marginal prospects now were open for bids and negotiation by foreign operators field-by-field on a production sharing basis. The terms were likely to prove more attractive than Colombia's previous upstream model, he said. The precise terms likely to be offered for large high-risk developments had still to be decided. "We are studying the possibility of a new kind of high risk contract for unexplored areas so probably through a bidding process we canattract companies to explore," he said. "We are looking to diversify the contracts we offer our partners to develop potential reserves."
Urdinola said potential reserves were estimated by Ecopetrol at 24 billion barrels compared to current commercial reserves of just 2.5 bnb.
Colombia's main foreign partner British Petroleum has complained that exploration has been stunted by its sliding scale contract which rewards the government with an increased share of profits as output rises.
"Our contracts are so rigid and so fixed they are not suitable for sending companies into areas like the Amazon or the western coast," said Urdinola. He said that with domestic demand growing at 4.6 % a year crude exports could be stifled early next century if new fields were not developed. Colombian crude production in March was 620,000 bpd with exports of 240,000 bpd. Output is expected to reach 800,000 bpd by the end of this year as BP's Cusiana development increases supplies.
Colombian oil refining capacity, dominated by the state sector, was seen rising from 285,000 bpd this year to 310,000 bpd in 2000 and 360,000 bpd by 2002, Urdinola said. Attracting private investment in refining would require an end to government subsidies on petroleum product sales, he said. The Ecopetrol president said also he remained unhappy about the level of government spending on protecting foreign oil operations from the threat of guerrilla attack.

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