Offshore Activity Heats Up In Caribbean Frontier

BMI View : Increased offshore exploration , specifically targeting gas , holds upside risk to our forecast for Colombia's booming hydrocarbons sector , w ith Anadarko and Ecopetrol among a number of partners preparing to target Colombia's underexplored but highly prospective Caribbean waters. Although we have concerns about the support for industry and infrastructure , along with the prospect of environmental risks, the uptick in both interest and investment in Colombia's offshore reinforces our bullish outlook for the country's oil and gas sector.

2013 will be an important year for Colombia's rising status as a center for exploration investment , with Anadarko and Ecopetrol planning to begin 2D and 3D seismic surveys on a number of deepwater blocks ahead of a joint drilling program me scheduled for 2014. R espon ding to media inquiries, Anadarko noted its previous 'tremendous success in basin floor fan systems similar to those found in Colombia' , indicating a confident outlook for the US - based independent which says it h as a 70% success rate in offshore drilling.

Anadarko and Ecopetrol 's efforts are just the latest in a number of promising developments seeking to tap Colombia's offshore riches. While current offshore production in the country is limited to the Chuchupa gas field operate d by Chevron , new investment in exploration - including a recent licensing round which awarded highly prospective offshore acreage - holds the prospect of increased output .

Indeed, campaigns have already yielded promising results . For example, Equion Energy - a joint venture between Ecopetrol and Talisman Energy - announced a potential natural gas discovery at the Mapele-1 well in the Caribbean in November 2012. Appraisal of the well is ongo ing but other players are set to venture into Caribbean waters targeting gas over the coming years.

Brazilian national oil company (NOC) Petrobras , which also partnered in the Mapele-1 discovery, is set to carry out exploration in Colombia's Caribbean waters . D rilling on the Tayrona block is set for 2013-2014 as part of Petrobras' plan to invest US$700mn through 2016. T he NOC has already declared that any gas discoveries could be marketed to both Colombia and Brazil . Royal Dutch Shell also plans to spend some US$200mn on offshore exploration in Colombia .

New investment and commercial discoveries will be necessary if Colombia is to realise its ambitious gas plans. While the country already exports gas to Venezuela via pipeline, it plans to become the 'gas hub for the Andean region' ( see our online service, July 18 2012, 'LNG Plans To Fulfill Gas Hub Ambitions' ) . The scheme would involve the construction of export facilities fed by domestic production and import facilities that would take advantage of the country's strategic location with access to both Atlantic and Pacific waters. Increased domestic supplies will also be necessary to support Colombia's domestic energy polic ies , as gas consumption is expected to continue rising from greater use in power generation and public transportation.

While our current forecasts show gas production risi ng from 11.5 bn cubic metres ( bcm ) in 2013 to 17.0 bcm in 2022, the recent uptick in exploration poses sizable upside risk to this outlook. Indeed , the National Hydrocarbons Agency (ANH) estimates offshore gas resources could be as high as 5.7trn cubic meters of gas (tcm) with a further 2.1t cm of unconventional gas hydrates. ANH estimates a further 12.6bn barrels (bbl) of oil resources may lie offshore.

Offshore Poses Upside To Growth In Gas Supply
Colombia Gas Production, Consumption & Net Exports (bcm)

These resource estimates underscore the interest in Colombia's hydrocarbons industry, which has seen oil production grow rapidly alongside improved security and more attractive fiscal terms. Although we still see a number of challenges, such as infrastructure bottlenecks and the persistent threat of infrastructure sabotage from rebel groups, growing investment in Colombia's onshore and offshore acreage supports our positive outlook for the sector ( see 'Additional FDI Supports Bullish Energy Sector Outlook', November 14 2012).

Similar obstacles await Colombia's offshore push, with high demand for rigs pushing up costs in the region and leaving supplies tight, creating a risk to drilling schedules ( see 'Seadrill Sees Order Backlog As Rigs Remain Costly & Scarce, November 30 2012). The absence of a well developed service and support industry, as well as the threat of an environmental disaster that could threaten revenues from tourism, are issues that must also be addressed as offshore exploration takes off.

Oil Sector Rises As Investment Pours In
Colombia Oil Production, Consumption & Net Exports ('000b/d)
This article is tagged to:
Sector: Oil & Gas
Geography: Colombia

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