Colombian Oil Output Soars As Pro-Market Policy Bears Fruit
By Inti Landauro, Of DOW JONES NEWSWIRES
BOGOTA -(Dow Jones)- Colombian government endeavors to open the oil industry
to private companies and lure investors with attractive conditions and reduced
levels of violence are finally paying off, with crude output in the country
soaring.
The government oil-licensing agency known as ANH said this week that Colombian
and foreign companies operating in the country produced an average 704,000
barrels of crude a day in October. The figure is the highest in a decade and 34%
more than the average in 2005.
"This is the result of the government's efforts, and I'd say that figure can
easily double in the coming years," said Ciro Mendez, the investment manager of
local private equity fund Tribeca Capital, which has parked $30 million of its
money in the small oil producer Petrolatina Energy PLC (PELE.LN).
Since he took office in 2002, President Alvaro Uribe has pledged to crack down
on Marxist guerrillas and revive a flagging economy.
The government has lifted restrictions on foreigners operating in Colombia's
oil industry, attracting private companies with lower royalties and improved
security in the country's jungles and mountains. The number of rebel attacks on
the Cano Limon pipeline, one of the preferred targets for guerilla groups, fell
to only 13 in 2008 from 170 in 2001.
In the past few years, the Colombian government has granted rights to explore
hundreds of areas across the country to a wide range of firms, from small local
ventures owned by a few engineers to the world's largest companies such as Exxon
Mobil Corp. (XOM) or BP PLC (BP) and emerging players such as India's Reliance
or China National Petroleum Corp.
In early December, ANH will begin the process of awarding rights to more than
100 lots all over Colombia. The process is scheduled to end in June.
In 2007, the government partly privatized state-owned oil company Ecopetrol SA
(ECOPETROL.BO), which then embarked on a massive $60-billion, eight-year
investment plan.
The government also has built a reputation for Colombia as a country where
contract terms are respected--unlike oil-rich Venezuela and Ecuador, where
governments have seized assets without always paying fair compensation.
The positive mood in Colombia has even pushed Venezuelan oilmen to seek jobs
next door. The best example is Canada-listed Pacific Rubiales Energy (PRE.T,
PEGFF), which accounts for much of the recent oil output increase and is run by
Venezuelan engineers.
The effects of Uribe's pro-market policies were slow kicking in, and oil
production continued sliding from 2003 to 2005. No significant increases were
registered until 2008, when a number of small projects began yielding results.
Tribeca's Mendez said Petrolatina, for example, produces about 2,000 barrels a
day now. He anticipates a production boost to 10,000 barrels a day within three
or four years.
In 2003, industry analysts reckoned the country would lose oil self-
sufficiency in 2007, as output was falling while consumption was up. Now they
see the country keeping its oil-exporting-nation status until 2018, and probably
beyond.
"It's not an issue anymore, not an immediate one at least," Mendez said.
The one thing Colombia still lacks is a big discovery. Proven reserves were
1.67 billion barrels at the end of 2008, but government officials and oilmen
such as Mendez are pretty confident somewhere in Colombia--in the southeastern
plains or off Caribbean shores--lies a huge reserve of oil or gas waiting to be
discovered.
So far it has been elusive, said John Padilla of the energy consultancy firm
IPD.
Without any big discovery, investors may tire of drilling in Colombia, but
probably not any time soon.
While total foreign direct investment in the first 10 months of this year fell
11% from the same period a year ago, investment in oil and mining rose 13%, and
both industries now account for 89% of foreign direct investment in the country.
-By Inti Landauro, Dow Jones Newswires; 57-1-610 70 44 Ext. 1131; colombia@
dowjones.com
(END) Dow Jones Newswires
11-20-091244ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|