COLOMBIA AUCTIONS OFF 22 NEW OIL BLOCS TO EXTEND

UNCLAS BOGOTA 004088 SIPDIS EEB/ESC FOR MMCMANUS; WHA/EPSC FOR FCORNEILLE; ENERGY FOR LEINSTEIN E.O. 12958: N/A TAGS: ENRG EINV ECON PGOV CO SUBJECT: COLOMBIA AUCTIONS OFF 22 NEW OIL BLOCS TO EXTEND SELF-SUFFICIENCY REF: BOGOTA 570 1.(SBU) SUMMARY: Amid falling petroleum prices and uncertain international financial conditions, Colombia has successfully auctioned oil and gas exploration rights in 22 onshore blocs in one of its largest offerings ever. The round attracted numerous medium-sized international companies, including one successful U.S. bidder (Lewis Energy),and more than USD 100 million in expected new investment, primarily in the heavy oil belt of Meta Department. GOC officials expressed satisfaction with the round, which follows a record year for hydrocarbons exploration in Colombia, and plan to auction 100 mini-blocs in early December. Based on the aggressive exploration push and the cumulative impact of several modest finds this year, the GOC now expects Colombia to remain oil self-sufficient until 2017, two years more than previous estimates. END SUMMARY Colombia Round 2008 -------------- ¶2. (U) On November 7, Colombia's National Hydrocarbons Agency (ANH) offered 43 new blocs for oil and gas exploration covering seven million hectares as part of Colombia Round ¶2008. Twenty-two blocs received exploration contract offers from ten companies. Among the most successful offerings were blocs in the lowland llanos region of Meta Department extending east of Bogota toward the Venezuelan border. Preliminary data suggests this area has strong potential for development of heavy crude oil deposits. ¶3. (U) A total of 39 international firms participated in the round. State-owned hydrocarbons company Ecopetrol bid on seven blocs and won four. Other successful bidders included Canada-based Pacific Rubiales (3 blocs),France-based Metapetroleum (3 blocs),Argentina-based Tecpecol (3 blocs), Argentina-based Pluspetrol (2 blocs),South Korea-based SK Energy (2 blocs),Colombia-based Hocol (2 blocs),India-based ONGC Vidash (1 bloc),Canada-based Talisman Energy (1 bloc), and San Antonio-based Lewis Energy (1 bloc). Under the terms of the new three-year exploratory contracts, the winning bidder must conduct further seismic evaluation and drill at least one exploratory well. The GOC expects total investment in exploration in the 22 blocs to surpass USD 100 million. ¶4. (SBU) ANH Director Armando Zamora told Econoff November 10 that the GOC considered the round fully successful as it met the GOC's target for confirmed offers on one-half of the blocs. He said investor focus unsurprisingly centered on the zones with known heavy oil and that most of the 21 blocs that did not attract offers lacked substantial preliminary data. More notable, Zamora said, was the fact that many of the successful blocs were the subject of intense bidding. He characterized the multiple bids on several blocs as the most he had seen in his experience managing previous rounds. More to Come -------------- ¶5. (SBU) Following the success of Colombia Round 2008, ANH plans to offer 100 mini-blocs in Putumayo, Magdalena and Meta Departments on December 4 and expects participation from as many as 70 companies. Zamora also said that ANH will do further research and data collection on the 21 blocs left from the November 7 round and re-offer them in 2009. New Findings Extending Self-sufficiency -------------- ¶6. (SBU) Colombia Round 2008 follows a record year for oil and gas exploration in Colombia with 100 exploratory wells drilled in 2008 and more than 90 production contracts signed. Thanks to this new exploration and the cumulative impact of several small findings in 2008, Director Zamora publicly estimates that Colombia's oil self-sufficiency has extended from 2015 to 2017. Although Colombia's proven reserves of 1.3 billion barrels are still below 2001 figures (1.8 billion barrels),Zamora expressed confidence that, based on new reserve reporting requirements in 2009 as well as the promising outlook for several of the newly auctioned blocs, Colombia will soon be positioned to announce petroleum self-sufficiency through 2020. BROWNFIELD