Oil and Gas News

Colombian oil production

According to Oil and Gas Journal (O&GJ), Colombia had 1.36 billion barrels of proven crude oil reserves in 2009, the fifth-largest in South America. The country produced 600,000 barrels per day (bbl/d) of oil in 2008, up from from 540,000 bbl/d in 2007. Before the increase in production in 2008, Colombia’s oil production had remained largely flat, following a period of steady declines: in 1999, Colombia’s oil production peaked at 830,000 bbl/d. The principle cause of the falling oil production was natural declines at its existing oil fields and a lack of sizable new reserve discoveries. However, a combination of changes to the regulatory framework and an improved security situation (see below) have contributed to increasing investment in the country. With oil consumption reaching an estimated 267,000 bbl/d in 2007, Colombia exports about half of its oil production. The bulk of those exports (155,000 bbl/d) to the United States in 2007. Much of Colombia’s crude oil is lighter and sweeter than other major Latin American oil producers, with its three export crude oils (Cusiana, Cupiagua and Orito) ranging between 28° and 36° API.

Since 1999, Colombia’s government has taken measures to make the investment climate more attractive to foreign oil companies. Upstream sector initiatives include allowing foreign oil companies to own 100 percent stakes in oil ventures; the establishment of a lower, sliding-scale royalty rate on oil projects; longer exploration licenses; and forcing Ecopetrol, the national oil company, to compete with private operators. The government has floated shares of Ecopetrol on the New York Stock Exchange, though it retains a majority stake in the company. The reforms have sparked a renewed interest in Colombia’s upstream sector, with record levels of exploratory and development drilling. The improvement in Colombia’s security situation has also been a significant contributor to the renewed interest by international oil companies.

As a result of these improvements, Colombia has begun to arrest the decline in its oil production and experience some growth. Nevertheless, Colombia still faces many challenges in its upstream oil sector, including a lack of proven oil reserves and steep decline rates at its largest oil fields. In addition, it is possible that the rise in production seen in 2008 was largely influenced by higher world oil prices, which provided additional incentives to invest in marginal fields. Finally, it is unclear if the recent investment flows can be maintained in the near term due to the weakening global economy. As a result, EIA forecasts that Colombian oil production will decline at an average of 4 percent per year in the short term, reaching 590,000 bbl/d in 2009 and 550,000 bbl/d in 2010.

Exploration and Production

The bulk of Colombia’s crude oil production occurs in the Andes foothills and the eastern Amazonian jungles. The largest field in the country is the Cusiana/Cupiagua complex operated by BP. Cusiana/Cupiagua represents the bulk of the decline in Colombia’s national oil production, with production at the field falling by over 50 percent since 1999. Colombia’s second largest field is Cano Limon, operated by Occidental, which has also witnessed signifgant declines in production. Other important oil projects in Colombia include the Suroriente field, operated by a consortium led by Petrotesting Colombia; the Guando field, operated by Petrobras; the Rubiales field, operated by Meta Petroleum; and the Orito block, operated by Canada’s Petrobank Energy and Resources.

Colombia has numerous, smaller fields spread throughout the oil-producing regions of the country. Vast unexplored and potentially hydrocarbon-rich territories remain in Colombia, which shares many of the geological features of its oil-rich neighbor Venezuela. In September 2008, Colombia awarded licenses to nine companies to explore the Llanos Basin, near the border with Venezuela, an area that has received little attention and could potentially hold large quantities of heavy oil.

Pipelines

Colombia has five major oil pipelines, four of which connect production fields to the Caribbean export terminal at Covenas. These include the 500-mile Ocensa pipeline, which transports 615,000 bbl/d from the Cusiana and Cupiagua fields; the 460-mile Cano Limon pipeline; and the smaller Alto Magdalena and Colombia Oil pipelines. The fifth pipeline, the TransAndino, transports crude from Colombia’s Orito field in the Putumayo basin to Colombia’s Pacific port at Tumaco; TransAndino can also carry crude oil produced in Ecuador. In 2008, Ecopetrol awarded a tender for the construction of a new, 24-inch pipeline connecting the Rubiales oil field. The Llanos Orientales pipeline would help sustain investment in new production in the region.

Downstream

According to OGJ, Colombia had 285,850 bbl/d of crude oil refining capacity in 2008. The country has five major refineries, all owned by Ecopetrol. The largest is the Barrancabermeja-Santander facility, with a capacity of 205,000 bbl/d. In 2006, Switzerland’s Glencore International and Ecopetrol launched an $800 million expansion of the Cartegena refinery. The project, scheduled for completion by 2010, will increase output from 75,000 bbl/d to 140,000 bbl/d and upgrade the facility to produce refined products that meet higher specifications. Although Colombia is a net oil exporter, it must import some refined products, as domestic demand outstrips production capacity. In 2008, Ecopetrol awarded a tender to Foster Wheeler to upgrade the Barrancabermeja refinery, improving its ability to process heavy crude oil, increase its production of cleaner fuels, and expanding its distillation capacity to 300,000 kb/d.

Biofuels

According to a Colombian industry group, Colombia produced 5,800 bbl/d of ethanol during the first half of 2008. In addition, a Colombian trade group estimated that the country produced 17,000 bbl/d of biodiesel in 2008. There have been several new biofuels projects announced in Colombia in recent years. In 2006, a consortium of Colombian companies announced that they would build three ethanol plants in the country, with a total production capacity of 5,600 bbl/d. The plants will mainly target export markets, but will also sell some of their production domestically.

Ecopetrol formed a joint venture in 2007 with local palm oil producers to build a biodiesel plant in Barrancabermeja, with a capacity of 2,000 bb/d. Ecopetrol aimed to blend most of the plant’s output with conventional diesel fuel produced by its refinery in the city. Colombian law requires that gasoline contain a 10 percent ethanol blend, while diesel must contain a 5 percent biodiesel blend.
Source: http://www.eia.doe.gov/emeu/cabs/Colombia/Oil.html

Tags: Cartegena refinery, Colombian law, Ecopetrol, Oil and Gas Journal, oil consumption, Orito field, Refinery