MASS OIL AND GAS EXPLORATION OFFERS IN COLOMBIA

UNCLAS SECTION 01 OF 03 BOGOTA 003878 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ENRG ECON PREL EINT SENV CO SUBJECT: MASS OIL AND GAS EXPLORATION OFFERS IN COLOMBIA REF: BOGOTA 3350; BOGOTA 3415 ¶1. (SBU) Summary. Colombia opened its ninth petroleum show on December 2 with offers to explore and produce oil and gas in 168 blocks throughout Colombia and offshore. Close to 1,000 businessmen and women were in attendance representing firms from North America, Europe, China, and Latin America. Although Colombia's oil production has grown substantially, the lack of a big discovery has tempered interest from the big multi-national companies. Discussions about the Copenhagen Climate Change Conference were critical, with the keynote speaker noting Copenhagen will be a disguised failure. End Summary. -------------- Ministers of Energy and Environment Speak Out -------------- ¶2. (U) Colombia's National Agency for Hydrocarbons hosted the ninth Colombian Petroleum Show in Bogota, December 2-4. Close to 1,000 experts attended the opening, representing all businesses in the petroleum sector. Minister of Mines and Energy Hernan Martinez highlighted the investment-friendly environment for the petroleum sector in Colombia and assured those present that the natural gas transit problem will be resolved in 2010 (ref A). ¶3. (U) Environment Minister Carlos Costa emphasized that Colombia has an impressive ecosystem that it seeks to protect. That said, Costa noted that the process to obtain an environmental license is transparent. The Minister underscored that the rules and the environmental restrictions are clear, and that both the environment and hydrocarbon sectors in Colombia are working together to promote oil and gas investment in an environmentally-friendly manner. -------------- Positive Outlook for Colombia -------------- ¶4. (U) Javier Gutierrez, President of Colombia's state-owned petroleum company Ecopetrol, remarked on the many reforms Colombia undertook to create a more open and business-friendly petroleum sector. Since 2004, Ecopetrol has had to compete like any other oil and gas company for exploration and production rights in Colombia. These reforms also generated significant growth in the petroleum sector, contributed to major increases in foreign direct investment, and increased oil production in Colombia. Gutierrez noted that Colombia is the fourth largest oil and gas producer in Latin America, has the fifth largest oil reserves, and possesses the seventh largest gas reserves in the region. He added that Ecopetrol alone plans to produce 1 million barrels of petroleum product by 2015, requiring a 12 percent growth year on year. ¶5. (U) Armando Zamora, Director General of the National Agency for Hydrocarbons (ANH),announced the offer of 168 blocks, covering 126,023,745 acres. Of these, 74 are small blocks that have geological data or are abandoned oil and gas plots; 31 are new blocks with oil and gas data/projections; and the remaining 63 blocks are new locations covering 76 percent of the area up for exploration and production. The new areas are located throughout Colombia, but for the first time expand into the northern Amazon BOGOTA 00003878 002 OF 003 area and around Colombia's Caribbean islands of San Andres and Providencia. Zamora hopes to sell at least 50 blocks, understanding that the industry continues to be cautious and selective. ANH plans to conduct road shows in New York, London, Shanghai, Buenos Aires, Calgary, and other sites to promote these blocks. ¶6. (U) Julian Lee of the Center for Global Energy Studies highlighted Colombia's growth in oil production, noting that from 2007 to 2008 Colombia had the fourth largest growth in oil production, behind Iraq, Kazakhstan, and Brazil. In January 2007, Colombia produced only 530,000 barrels per day (bpd),but in October 2009, Colombia began producing over 700,000 bpd (the highest in over a decade),and expects to reach 800,000 bpd in ¶2010. Colombia's goal is to produce 1 million bpd in 2014. Lee noted that Colombia's oil is not "new oil," but is considered new as the country emerges from a period of violence and instability. -------------- Room for Non-Conventional Hydrocarbons -------------- ¶7. (SBU) Discussions on non-conventional hydrocarbons focused on shale gas, coal-bed methane, oil (tar) sands, and marine gas hydrates. A StatoilHydro company official noted Colombia as a potential source for shale gas with three basins that could yield 30 trillion cubic feet of gas, but cautioned that large amounts of water is needed. Romeo Flores of the U.S. Geological Survey (USGS) indicated there is great potential for coal-bed methane (CBM) in Colombia (Note: Flores is already working in Colombia under a Memorandum of Understanding between USGS and Ecopetrol to provide CBM technical assistance. ANH is in the process of requesting technical assistance from the U.S. Trade Development Agency, ref B, to develop a CBM regulatory framework. End Note). ¶8. (U) Daulat Mamora of Texas A&M highlighted several areas throughout Colombia where large oil sands have the potential to produce significant amounts of oil, though carbon emissions are 3 to 5 times greater than conventional oil and gas extraction. Mamora claims that Colombia has theoretically up to 68 billion barrels of oil in the following areas: Florencia (20bn bbl),San Vicente (29bn bbl),Rio Guejar (15bn bbl),Rio Nare (3bn bbl) and Sogamoso (704mn bbl). University of Texas' Nathan Bangs described marine gas hydrates as the most exotic non-conventional hydrocarbon and added that the technology to explore and produce gas from hydrates is many years away. That said, Bangs noted Colombia has the potential for 400 trillion cubic feet of gas in the form of hydrates. -------------- Criticism about Copenhagen -------------- ¶9. (SBU) On the opening day of the conference, only one presenter spoke favorably of the Copenhagen Climate Change Conference, noting that it was a good start. The majority of other speakers criticized the Copenhagen event as a likely conference of discussions but no actions. The keynote speaker, former U.S. BOGOTA 00003878 003 OF 003 Secretary of Defense and Energy Jim Schlesinger, noted to the audience to take Copenhagen with a couple of grains of salt. He claimed that the end result will only be a disguised failure, which will lead to cycles of blame. Schlesinger recounted his conversation last week with the Chinese Ambassador to the U.S., noting that China's priority is to ensure that Copenhagen does not affect its economic growth. He added that China is more concerned about its sulfur than its carbon dioxide emissions. BROWNFIELD