Colombia’s state-run oil company Ecopetrol SA is looking to spend $500 million in exploring unconventional deposits over the next three years, its CEO said on March 5, starting with pilot programs in the Magdalena Medio region.
“We’ve applied for some licenses, we will apply for more... roughly 20 wells that will need to be drilled, fracked, cored, lobed, there's lots of activity, so there's quite a bit of investment,” Ecopetrol’s CEO Felipe Bayon told Reuters in an interview.
The proposed $500 million is part of the $12 billion to $15 billion allocated by Ecopetrol to investing between 2019 and 2021, said Bayon, adding that these pilot programs would involve participation of nearby communities as well as regulators, authorities and unions.
“The advantage of the pilots is it’s like having a fish bowl you know everybody can look into and be comfortable with what's being done.”
Some local communities and many environmentalists in Colombia are opposed to the controversial use of hydraulic fracturing, known as fracking, technology which breaks rock formations with pressurized liquid.
Its use is credited for booming oil and gas production in the U.S., but environmental activist have blamed it for water pollution.
In February, a commission of experts issued non-binding recommendations regarding monitoring of these pilot programs and the future use of fracking in Colombia.
“It's fundamental that we incorporate the recommendations from the expert commission,” Bayon said. “We hope that we can demonstrate through the pilots that this can be done responsibly and safely and with the use of the highest worldwide standards.”
Bayon said this year’s budget incorporates an estimated price of $65 per barrel of oil, “but all of our investments are tested at $55.”
U.S. crude futures have averaged roughly $53.40 so far this year.
“I can confirm we are reviewing if we [will] do tactical hedging for specific commercial deals,” he said, without giving more details.
Looking beyond the investment in unconventional deposits, the oil company said it will try to fill the void left by Venezuela as U.S. sanctions on its oil company have triggered a scarcity of heavy crude in the Atlantic basin.
Bayon said about $1 billion will be deployed in projects including six wells around the tight sands and naturally fractured reservoirs in the Magdalena Medio, five to 12 wells looking for gas onshore near the Caribbean coast and about six more offshore wells.
Ecopetrol will also look to sign more exploration and production contracts this year both in Colombia and abroad.
“We’re actively looking to continue to strengthen the partnerships that we have, both inside Colombia and internationally,” Bayon said.
The company closed a deal with Royal Dutch Shell and Chevron Corp. last December after winning a block in a September auction as part of a consortium with BP and CNOOC, both for exploration in Brazil.
The company has had to deal with at least a dozen pipeline attacks, usually attributed to leftist guerrillas, so far this year. However, Bayon said, they have had no deferral in production as they have been able to use alternative routes to take the oil to port.
“We spent between $30 [million] and $40 million repairing the pipelines last year. That’s money that we could have invested somewhere else, either in our business or social development.”
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