Oil: a Bonanza without Crude
By: Isis Beleño, Unimedios
Oil production in Colombia has reached record levels. The country is producing around 927,000 barrels per day, the highest figure since 1999, when 780,000 barrels per day were produced. And expectations are even higher: the Ministry of Mines and Energy estimates that production will soon exceed 1 million, and for 2014 will have reached 1,150,000. An oil bonanza.
International crude prices have also been favorable. As never before, the price of a barrel has hit record highs and is currently around US$93. Price and production are the elements that many have referred to as an oil "bonanza".
Since 2007 there has been a significant acceleration in national production, which has gone from 531,000 barrels per day in that year to 785,000 in 2010. This wildly optimistic panorama however is not complete. The experts warn that the country's reserves are being exhausted and if no new fields are discovered within 10 years, crude will have to be imported.
Germán Corredor, director of the Colombian Energy Observatory (Observatorio Colombiano de Energía), points out that in the country's oil history only four or five large fields have ever been found, such as Caño Limón and Cusiana. "In the last 20 years we have not heard of a single large-scale discovery. Fortunately small fields have been found, which have kept the reserves stable, but there has been no significant increase in them, although production has been greatly expanded".
Reserves: until when?
As of December 2010, domestic oil reserves had reached 2.058 billion barrels, and according to official projections, self–sufficiency will be maintained until 2020. Without a significant increase, growing production and improved technology for extraction in the mature fields, in a few years the country will be unable to supply itself.
In this context, is it possible to speak of an oil bonanza? For how long will the country be self–sufficient in fuels?
Alejandro Martínez, president of the Colombian Petroleum Association (Asociación Colombiana del Petróleo – ACP), in an interview with the UN Periódico in late 2010, explained the reasons for the favorable oil situation. "What has happened is that there has been an increase in the level of recovery in small fields, which had previously been discovered, based on large–scale investments in the use of state–of–the–art technology. This has been due to several factors: oil policy, increased investments in old fields and a substantial rise in the price of oil, which traditionally had been between 17 and 18 dollars".
In this industry, the multinational companies are quite optimistic. Private investment has grown ostensibly and according to ACP estimates, around 3.6 billion barrels of oil could be found.
"3.6 billion barrels are expected to be incorporated during this decade. This implies the drilling of 90 exploratory wells each year and more than 4 billion dollars of annual foreign investment over the next decade; these levels, along with the figures on exploitation and new reserves that starting in 2012 would mean a daily production of more than one million barrels per day for 10 years, are excellent news for the country", according to Martínez.
To find these resources, Ecopetrol –whose production accounts for 61% of the country's total– has begun intense exploratory efforts. The company is leading projects in an area of around 17 million hectares, compared to 2002 when only 9 million had been explored.
For the multinationals, the trend is the same: to explore. In Colombia, the private sector has a 50% share in investments in projects aimed at finding oil. The challenge is to discover new fields that would make it possible to maintain the growing trend in production.
Prudence regarding the figures
Carlos Rodado Noriega, Minister of Mines and Energy, expresses moderate optimism and prefers to avoid words such as "boom" or "bonanza". For him, the surge in hydrocarbons is evident; this in turn has been reflected in increased revenues in the sector. "We must be aware that, when projections are made about prices and quantities, we need to include uncertainty factors. We have to be a bit prudent".
A large part of this favorable situation stems from the production of heavy crude, which until a few years ago was little appreciated. Heavy crude is different from light crude because its yield in gasoline is lower; it is denser and more viscous, which increases the costs of extraction, transport and refining.
The Rubiales and Castilla fields, in the Llanos Orientales (Eastern Plains), have become one of the country’s most important heavy crude reserves. Over the last five years their production has risen considerably, and firms such as Pacific Rubiales Company, with a presence in the Rubiales field, report a production of approximately 200,000 barrels per day.
Why has heavy crude become so important? Professor Sergio Lopera, from the Mining Faculty at the Universidad Nacional (National University) in Medellín, explains that "the price of a barrel of oil in the markets make the extraction of this type of crude very attractive. Extracting Castilla crude costs 7 or 8 dollars per barrel, which in the context of prices of 9 dollars per barrel is not profitable, but when prices rise as they have in recent years, Castilla crude can easily be sold for more than 50 dollars".
Without large-scale new findings and with exploration projects currently under way at top speed, the most immediate challenge is to develop technology to reduce uncertainty during the exploration phase.
"Colombia is a country with oil but it is not an oil country, and under that premise we must work to find reserves in very complex structures. Geologically, we could say that in 70% of the country there is great potential to find hydrocarbons", affirms Édgar Rodríguez, professor of Petroleum Geology at the Universidad Nacional de Colombia.
Academics and economists point out the importance of developing new talents, investing in knowledge and leveraging large–scale infrastructure projects. Science and technology are keywords in transforming a raw materials exporting country into a nation with a strengthened petrochemicals industry that would be able to compete in international markets. Hopefully the favorable situation in the field of hydrocarbons will make it possible to see its benefits even in scarcity!