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Wednesday, April 2, 2008

Colombia sitting on big oil reserves

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IN DEPTH


Colombia sitting on big oil reserves


By Ed Crooks in London

Published: April 1 2008 22:04 | Last updated: April 1 2008 22:04

Colombia's heavy oil area could hold 20bn barrels of recoverable resources,
giving the country greater reserves than leading producers such as Mexico
and Algeria, said its natural resources agency.

Foreign investment in Colombia's oil and gas industry is booming, and the
country hopes to lift oil production to 1m barrels a day in the next decade,
from about 550,000 b/d currently.

Colombia's heavy oil potential is dwarfed by that of its neighbour
Venezuela, which is estimated to have at least 240bn barrels recoverable in
its Orinoco belt region. But Colombia has the great advantage of welcoming
foreign investment.

It is one of the few countries with significant resources becoming more
accessible to international companies, and capable of growth in oil exports.

The ANH, Colombia's national hydrocarbons agency, is on Wednesday setting
out details of Colombia's second licensing round in London, following
presentations in Houston last week.

Larger companies have been invited to bid for heavy oil exploration acreage
in the Llanos Basin, towards the border with Venezuela. ExxonMobil and
<http://markets.ft.com/tearsheets/performance.asp?s=us:CVX> Chevron of the
US, <http://markets.ft.com/tearsheets/performance.asp?s=uk:RDSB> Royal
Dutch Shell and
<http://markets.ft.com/tearsheets/performance.asp?s=ru:LKOH> Lukoil of
Russia have expressed interest.

The estimate of recoverable heavy oil comes from a study by
<http://markets.ft.com/tearsheets/performance.asp?s=us:HAL> Halliburton, the
oil services group, which suggested there were 100bn barrels in place, and a
typical recovery factor of 20 per cent.

Halliburton also suggested Colombia could have more than 50,000bn cubic feet
of gas, about as much as Canada or the Netherlands.

David Thomson of Wood Mackenzie, the consultancy, said he thought the
estimate of recoverable heavy oil was "probably on the hopeful side, but by
no means impossible".

"Colombia is not like Venezuela, Bolivia or Ecuador, which have all been
pursuing unfriendly policies towards business, and its geology is also
relatively easy, so it is attractive."

Armando Zamora, director-general of the ANH, told the Financial Times he
thought Colombia was now the most popular country in Latin America for
foreign investment in oil and gas production. That investment rose from
$1.8bn in 2006 to $3.5bn last year, and is expected to be close to $5bn
(€3.2bn, £2.5bn) this year.

Mr Zamora acknowledged that in the areas being offered for heavy oil there
were security concerns because of possible attacks by Farc rebels, which he
said took refuge in bases across the border in Venezuela, and there would be
a need for the government to deploy additional troops "to be on the safe
side".

However, Farc activity had declined sharply.

He would reassure potential investors about the tension between Colombia and
its neighbours Venezuela and Ecuador. "There is no chance we would start a
war with them," he said.

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Times Limited 2008

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