Saving Grace

View of the oil refinery Ecopetrol in Barrancabermeja, Colombia, March 2017

Last week Ecopetrol and Anadarko made Colombia’s largest deepwater gas reserve discovery in 28 years. This massive find has brought relief to the country’s energy industry and allayed concerns about declining fossil fuel supplies.

“We will now be able to secure gas production until 2027,” stated Colombian President Juan Manuel Santos in a video on Twitter. “This will boost foreign direct investment into the country and maintain the importance of Colombia in the global hydrocarbons market,” he continued.

The discovery is located between 3,675m and 4,415m below sea level in the south Caribbean Sea. Its total area, across three different blocks, stands at around 14,000sqkm, half the size of Belgium.

Ecopetrol, which is 88% owned by the Colombian government, together with the US-based Anadarko, announced the discovery in a week in which oil prices dropped to a five-month low, hitting USD45 a barrel.

In the case of Anadarko, stakeholders were subdued in their response, as the company had just released somewhat disappointing Q1 results on May 2, reporting a USD12 million increase in its net loss for the period. However, its shares gained about 1% of value in the two days following the announcement of the discovery.

The commercial development of this discovery will still take between seven and 10 years to commence. “The problem with offshore is that it is a long-term business and benefits will not be visible in the short term,” said Eduardo Rodrí­guez, President of Shell Colombia in an interview with TBY in 2016.

“With the existing combination of gas fields in the area, Colombia is opening the door to study the possible development of a cluster specialized in gas production, which will boost the project’s profitability and efficiency,” pointed out Ecopetrol in a press release.

Colombia has a huge domestic market for natural gas consumption. More than 8.4 million Colombian families use gas on a daily basis, while over 550,000 motor vehicles use this hydrocarbon to get their engines working, according to the local press.

“The information that we have in Colombia indicates that gas and oil reserves are low, and it is important in that regard that offshore exploration increases oil production,” noted Samuel Iguaran, General Manager in Colombia of Zaramella & Pavan Construction, in a recent TBY interview.

According to IEA statistics, Colombia was the 19th largest oil producer in the world, extracting almost 1 million barrels per day. It has the 39th biggest proven oil reserves, but fears about the life cycle of these assets had come to the fore over the past decade.