September 24, 2019 / 4:47 PM / 21 days ago

Four Colombia fracking projects could bring $5 billion in annual investment

BOGOTA (Reuters) - Four fracking pilot projects in Colombia could bring in $5 billion annually in investment once they are in the production phase, industry leaders said on Tuesday, as the country awaits regulation that will allow the projects to begin.

FILE PHOTO: A wall with the carved phrase that reads "Superior Council of the Judiciary, Council of State" is seen on the facade of the Palace of Justice in Bogota, Colombia September 10, 2019. REUTERS/Luisa Gonzalez

The potential use of fracking in the Andean country has sparked impassioned debate, with environmental groups saying it could damage water supplies and cause earthquakes, while supporters say it is a key to energy self-sufficiency.

The top administrative court, the Council of State, is hearing a case on whether hydraulic fracturing, which breaks up rock formations with pressurized liquid, should be allowed but it has said pilot projects recommended by an expert commission can go ahead.

Four pilot projects — one run by coal company Drummond [DRMND.UL] and the others by oil companies Ecopetrol, Exxon Mobil and Conoco Phillips — will generate billions of dollars in investment over the next few years, the head of the private Colombia Petroleum Association, or ACP, said.

“In the first phase of the four pilots they will require investments of around $600 million per year - so we’ll surely have two, even up to three years, with investment of that amount and once we pass to the production phase they will require investments of around $5 billion per year,” Francisco Lloreda told journalists.

Lloreda said he hoped work on the pilots, or at least the infrastructure required for them, could begin next year.

“We hope to start at least the civil works next year and hopefully we can be perforating next year,” he said, adding the four pilots could generate around 450,000 barrels per day (bpd) in their production phase.

Colombia currently produces about 860,000 bpd.

The tribunal’s decision to allow the pilot projects has separated them from the larger case on fracking, said German Espinosa, the head of oil services guild Campetrol.

“The pilots have nothing to do with the regulation that exists currently so surely what will happen is that (the government) will need to create some technical protocols and the national environmental authorities will need to say how this experimental phase will be managed,” Espinosa said.

ACP’s Lloreda said: “We have faith the government will soon have those instruments so we can advance.”

State-run oil company Ecopetrol, which is acting as a co-defendant in the court case, had its request to start a pilot project suspended by the environmental licensing authority before the court’s ruling. ConocoPhillips and Canacol also had requests for licenses shelved prior to the decision.

Reporting by Julia Symmes Cobb; Editing by Edmund Blair

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