UPDATE 2-Colombia's Ecopetrol says Cano Sur oil block viable

Thu Dec 5, 2013 11:23am EST

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By Luis Jaime Acosta

BOGOTA Dec 5 (Reuters) - Colombia's state oil company Ecopetrol said on Thursday the onshore Cano Sur Este block it owns is commercially viable with proven reserves of 22.4 million barrels, an important top-up to supplies that had diminished in recent years.

The find, though equating only to about a month's worth of Colombian crude output, is significant for the company, marking the first time in a decade it has declared commercially viable an oil area it fully owns and where it plans to operate alone.

Ecopetrol said it expected Cano Sur Este in the southeastern province of Meta to produce 25,000 barrels per day (bpd) by 2016, up from 1,727 bpd at present. The company will invest $656 million in the block and drill 135 wells there. The site could contain as much as 492 million barrels of crude, Ecopetrol said.

Ecopetrol shares rose 1.8 percent by mid-morning to 4,045 pesos ($2.08) following the announcement made at a press conference held by Ecopetrol's Vice President Hector Manosalva.

"The results obtained in Cano Sur confirm the potential of this zone in heavy crudes, one of the company's focus areas," Chief Executive Javier Gutierrez said separately in a statement.

Cano Sur Este accounts for about one tenth of the larger 611,000 hectare Cano Sur block, all of which is owned by Ecopetrol. The density of crude produced there since 2011 during exploration and testing, which totaled 516,881 barrels, was 13.5 API, Ecopetrol said.

Boosting reserves has been a priority for Latin America's fourth-biggest oil producer after Venezuela, Mexico and Brazil. By the end of 2012, Ecopetrol's reserves were 1.88 billion barrels of oil equivalent. The proven reserves in Cano Sur would add about 1 percent to that amount.

The publicly traded company plans to spend $75 billion by 2020 to increase oil and gas production to 1.3 million barrels of oil equivalent per day (boed), from current output which has neared 1 million boed in recent months.

Nationwide, by the end of 2012, Colombia had reserves of 2.3 billion barrels, up 5.2 percent from 2011, guaranteeing domestic supplies for 6.9 years.

Colombia's security situation improved significantly in the last decade due to a U.S.-backed offensive against the country's two left-wing guerrilla groups, the FARC and smaller ELN, though attacks by the rebels on oil pipelines that pass through remote areas appear to be on the rise again.

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