Colombia's production and reserves are growing, and they are growing on the back of heavy crude. The Latin American nation's oil and condensate production jumped from 670,000 barrels a day in 2009 to 785,000 barrels a day in December 2010. The impressive rise continued a turnaround that began in 2007, as the government's aggressive program to entice E&P companies and their capital back into the country's juicy petroleum basins began to pay off.

Explorers have always thought Colombia had potential, but rampant security problems and unfavorable fiscal terms dampened interest. Now, fresh discoveries and better deals have lured back investors. The raging guerilla campaigns by anti-government forces have abated, and the government has wrested back control of large sections of the country.

"Colombia is underexplored, especially for heavy-oil deposits," says Laura Atkins, director of petroleum research for Hart Energy and author of the study, Heavy Crude Oil: Global Analysis and Outlook to 2030. The country's current production is a mixed bag of light and medium crudes, but a decided shift toward heavier oils is already evident. "To a large extent, we believe that Colombia's future production growth will come from heavy oil," she says.

Investment advisory firm Tudor, Pickering, Holt & Co. also sees substantial upside in Colombia's heavy-oil picture. "High permeability, relatively low viscosity, and discounted royalty rates provide high netback returns on cold-flow development," noted analyst Anish Kapadia in a recent report.

A couple of Canadian-listed firms, Pacific Rubiales Energy Ltd. and Canacol Energy Ltd., have tied their fortunes tightly to the heavy-oil effort.

Colombia's largest low-gravity producing field is Rubiales. Located in the Llanos Basin, Rubiales is a combination hydrodynamic and stratigraphic trap that contains 4.2 billion barrels of original oil in place (OOIP). Although it was discovered by Exxon in 1981, its development was stymied by its 12.5-degree crude, its remote location and the 40-year guerilla war.

Daily gross production at the field was just 18,300 barrels a day in 2008, when Pacific Stratus Energy Ltd. entered the picture. The firm acquired 50% in one of two concessions covering the 135,000-acre deposit, and 40% in the other. Its partner is Ecopetrol, the Colombian state oil company.

A year later, Pacific Stratus changed its name to Pacific Rubiales and embarked on a stunning growth path.

Today, Rubiales Field makes 138,000 barrels of oil from 229 producing wells, and a major development-drilling effort is under way. The partners are also starting a pilot project at Quifa, a nearby satellite field, to determine if its proprietary STAR method (synchronized thermal additional recovery) can boost recoveries from current levels of 10%.

Southern Colombia's Putumayo Basin also holds potential. In 2008, interest in the basin's heavy-oil possibilities was stoked when U.K.-based Emerald Energy Plc discovered 10.5-degree oil on the Ombu Block. The Capella 1 was drilled to a depth of 3,802 feet in 20 days and encountered 189 feet of pay in the Mirador formation.

In 2009, Emerald Energy was acquired by Sinochem Group, one of China's immense state-owned energy companies. At present, 12 wells have been drilled in Capella, and OOIP is estimated at 2.2 billion barrels. This year, 28 new wells are planned.

Now the Canadian connection: Canacol Energy owns 10% of Capella. The field is on track to produce 100,000 barrels of oil per day in 2015, from conventional cold production methods. As at Rubiales, the application of secondary and thermal recovery processes could substantially raise recoverable reserves.

Since its success at Capella, Canacol has greatly expanded its holdings in the area. Its nearby blocks include Tamarin, Cedrela and Sangretoro, and later this year it will launch a five-well exploration program targeting these prospects.

The outlook for heavy-oil production in Colombia is bright, says Atkins. "With existing and new discoveries, heavy-oil production should increase to 425,000 barrels a day by 2015. If potential discoveries are taken into account, heavy-oil volumes could reach 625,000 barrels a day by 2020."

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