1.7 TRILLION CUBIC FEET METHANE GAS DISCOVERY AT

C O N F I D E N T I A L BOGOTA 007731 SIPDIS SIPDIS E.O. 12958: DECL: 08/22/2016 TAGS: EINV ENRG EMIN VE CO SUBJECT: 1.7 TRILLION CUBIC FEET METHANE GAS DISCOVERY AT DRUMMOND COLOMBIA REF: BOGOTA 4125 Classified By: DCM Milton Drucker for reasons 1.4 (b) and (d) ¶1. (C) U.S. based Drummond Corporation announced a 1.7 trillion cubic feet find of methane gas at their coal facility in La Loma, Cesar and at another block in La Guajira. The deposits increase by more than one-third Colombia's total reserves, presently estimated at 4.7 trillion cubic feet. The President of Drummond Colombia, Augusto Jimenez, told econoffs the company would like to sell some 80 percent of the gas, the remainder to be utilized in support of their coal operations. Drummond plans to make a USD 1.3 billion investment to exploit the gas over the next 3 years. ¶2. (C) Drummond estimates that 70 percent of the find is contained at its coal facility in La Loma, the remainder at theSutterhome facility in La Guajira, a 70/30 joint venture with state oil company Ecopetrol. Although Drummond Corporation has never commercially exploited a gas deposit, Jimenez indicated that the company intends to do so on its own without outside partners. Drummond currently employs 3500 at its coal mining facilities, and 6500 throughout Colombia, including Bogota headquarters and part-time contractors at its port facility in Santa Marta. Company officials claim that an additional 4000 jobs will be created through investment in the exploitation of the gas. ¶3. (C) It is unclear at this stage how the surplus gas will be utilized. Newly installed Minister of Energy and Mines Hernan Martinez told the Ambassador in his introductory meeting on August 22 that a domestic electrical energy crisis was brewing, and that increased generation from thermal sources would be required. The GOC may decide to utilize the gas to supply electricity to major nearby population centers of Barranquilla and Cartagena. Colombia has no present LNG facility, complicating efforts to export the gas. Although Jimenez told econoffs that Drummond was exploring exportation to Venezuela viathe La Guijira-Maracaibo pipeline presently under construction (reftel),post regards this possibility as remote. Jimenez added that should Colombia successfully find offshore deposits, a pipeline to Panama and Central America might become economically feasible. 4, (C) Drummond's exuberance over the gas has not been shared by the GOC since the company made public its finding without any prior notice or data sharing with the GOC. Minister Martinez -- a former coal executive with Exxon -- was clearly annoyed that Drummond has presented no data in public or private to back up its claim of "proven reserves". Until such data is presented and verified by an independent third party, the GOC cannot legally certify the wells. WOOD =======================CABLE ENDS============================