August 31, 2018 / 3:01 PM / in 5 months

Six companies apply for 21 Colombian oil exploration areas

BOGOTA (Reuters) - Six mostly foreign companies have so far made bids to explore for oil in 21 areas in Colombia under a new system that seeks to boost investment and find new deposits to increase the nation’s reserves, a senior government official said.

FILE PHOTO: Orlando Velandia, head of Colombia's National Hydrocarbons Agency (ANH), speaks to Reuters in Bogota, Colombia July 23, 2018. REUTERS/Carlos Julio Martinez/File Photo

Under the new system, approved in early August by former President Juan Manuel Santos’s administration, companies can bid to explore in areas not yet offered by the government.

“We are very satisfied with the first results,” Orlando Velandia, president of the National Hydrocarbons Agency (ANH), told Reuters late on Thursday. He said all bids were for the continental zone, which tends to be cheaper than offshore.

The names of the companies are confidential, he said.

Velandia said Colombia, Latin America’s fourth biggest crude producer, is preparing to offer another 20 exploration blocks, including two offshore, which will demand initial investments of some $400 million.

Colombia has awarded blocks to the highest bidder every two to three years, but the new system will give priority to the first company that requests access to additional areas, likely improving the offers of other bidders.

Colombia last held rounds, or auctions, in 2012 and 2014, when it awarded 76 blocks. The four years of inactivity was due to the drop in international oil prices.

The changes, including contracts adjusted to international crude price fluctuations and the chance for companies to propose exploration on land not yet offered, will help attract more spending and double reserves to about 10 years worth of consumption, Velandia said.

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.

Companies that have problems with social protests or delays in environmental licensing in Colombia could be offered alternative areas, according to Velandia.

Protests and pipeline bombings have been a major headache. State-run Ecopetrol  lost some $100 million earlier this year due to blockades.

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

Reporting by Luis Jaime Acosta; Writing by Helen Murphy; Editing by Jeffrey Benkoe

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