Colombia's Piedemonte vital for BP, sweeter terms wished for

Dec 13, 1996 01:00 AM

British Petroleum considers its Piedemonte prospect in eastern Colombia "fundamental'' to its world-wide operations despite drilling problems and wrangles over the exploitation contract. BP predicts the field, still at the test stage, could come on stream by the end of 1999. Total cost of developing the field, estimated to contain between 600 mm and 1 bnb of crude and condensates, could run to about $ 2.2 bn, some of which would be shared by state oil company Ecopetrol. The recognition of the strategic importance of the 287,000 ha block, in which BP has pinpointed three promising hydrocarbon formations after exploring just 15 % of the total area, once again raises the question how BP will push the Colombian government for sweeter contract terms. BP argues that given tough drilling conditions, the terms of its so-called sliding scale association contract with Ecopetrol makes it unprofitable to exploit the field. Under the existing contract, Ecopetrol's share of the profits rise as production increases from 50 % to a maximum 76 %. BP has been pushing for a so-called R Factor contract -- which the Colombian government has so far denied -- which would take account of investment and operating costs to ensure adequate profit margins. Last month, Colombia's Mines and Energy Minister Rodrigo Villamizar proposed BP should hand back rights to the 85 % of the block that is virtually unexplored with the guarantee that Ecopetrol would re-award BP half that area under R Factor conditions at a later date and contract out the remainder to other companies. BP is said to "seriously considering'' the proposal. It is understood, however, that BP would be loath to surrender the rights to almost 50 % of a block with huge potential under the current offer on the table. BP has recently been hit by allegations of indirect links to right-wing paramilitary death squads that have assassinated social leaders close to its operations in eastern Colombia.

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