A complex landscape for Colombia’s oilfield services sector

Colombia

Ricardo Andrés Sarmiento, CEO of Estrella International Energy Services, talks to The Energy Year about the challenges the oilfield services sector has faced in Colombia and the company’s current contracts and activities. Estrella International Energy Services is a specialist in oilfield services.

What challenges does the oilfield services sector face amid diverse uncertainties?
The oilfield services sector in Colombia has experienced a significant downturn, marked by a sharp reduction in activity. Currently, the number of operational rigs has fallen below 25, which is in stark contrast to 2011, when Ecopetrol operated over 40 rigs alone. This decline has triggered a competitive struggle over tariffs, leading to price drops and heightened competition among service providers.
Service providers are navigating a complex landscape characterised by deteriorating security conditions and increasingly challenging dynamics with local communities. Compounding these issues is the uncertainty surrounding the future of oil and gas activities in Colombia.
Ecopetrol has yet to disclose its development plan for the coming years, further fuelling this uncertainty. Consequently, many oilfield services and drilling companies are shifting their focus to other markets, including Ecuador, Venezuela, Peru and Argentina.

What current contracts and activities is Estrella International involved in in Colombia?
In the first quarter of 2024, Estrella successfully completed a drilling campaign with Perenco in Casanare, which involved three wells. We maintain a strong professional relationship with Perenco, having collaborated on their last two drilling campaigns. They typically operate during the dry season due to access challenges in their fields.
In July 2024, we secured a contract with GeoPark for drilling three wells in Putumayo, with the potential for a two-year extension. Additionally, we are collaborating with Black Energy, with plans to spud our first well by the end of October. Our drilling product line remains our most robust business segment in Colombia.
We also have a cementing contract with Gran Tierra, a three-year well abandonment project with Ecopetrol in La Cira and coiled tubing contracts with Frontera Energy and Parex. Furthermore, we are exploring a geothermal project in collaboration with Ecopetrol and Baker Hughes at Nevado del Ruiz. While we have a solid portfolio of contracts, it still falls short of meeting our fleet and financial commitments.

To what extent is Estrella International expanding its presence in Argentina?
Argentina represents a significant growth opportunity for us, particularly in the Vaca Muerta region. We have a directional drilling line – our strongest product line – which was developed in partnership with Scientific Drilling, a Houston-based company.
We have successfully secured contracts with major players, such as YPF, Pluspetrol, TotalEnergies, ExxonMobil and Tecno Patagonia. Our primary objective is to further consolidate and enhance our position in Argentina.
We are also on the verge of launching a new service line called Managed Pressure Drilling (MPD), thanks to our partnership with Cubo Petroleum, a Mexican company specialising in this technology for controlling downhole pressure.

What growth opportunities does Peru represent?
Having operated in the region for quite some time, we’ve experienced fluctuations in activity. However, this year marks a turning point, with increased momentum driven by the entry of new exploration and production players, such as OIG Peru and PetroTal.
Our primary objective is to solidify our presence in the Talara region, where we are now considering the deployment of additional workover rigs. Additionally, we plan to introduce new product lines, including cementing, coiled tubing and potentially drilling services.
Our unwavering commitment to risk-based process safety has enabled us to achieve a remarkable milestone: three consecutive years without accidents involving personnel in our Peruvian operations. As we look to the future, we aspire to set the standard as the first oil and gas company in Peru to deliver both safe and efficient services, reinforcing our reputation as a leader in the industry.

What initiatives is the company undertaking in terms of CSR and ESG?
In our CSR efforts, we focus heavily on community engagement. A notable initiative in Cabuyaro involves supporting local sports programmes. We began this initiative with 150 children, hoping that at least one would emerge as a national champion in track and field. Today, we proudly celebrate four national champions, demonstrating our success in transforming the community through sports.
Regarding our ESG commitments, we are dedicated to decarbonisation and have pledged to achieve carbon neutrality by 2030. We are actively developing a solar initiative at our operational base in Tocancipá, where we are installing solar panels to power our facilities. This initiative will make us the first oilfield services company to operate using only clean energy.

Are you seeking investors for Estrella Energy, and what are your regional expansion strategies?
We are part of a private equity fund, Southern Cross Group, which is currently evaluating various exit strategies. As we support this process, we remain open to acquisition offers. This is an opportune time for potential investors, as the company holds significant potential in the region. We are specifically looking for investors, whether funds or operating companies, interested in establishing their own drilling and service lines.
In parallel, we are actively pursuing market entry in Venezuela and Ecuador while also introducing new product lines in Argentina, such as MPD and rotary steerable systems. In Venezuela, we are currently engaged in a tendering process with Chevron, and in Ecuador, we have established a subsidiary and have a local representation to facilitate our operations.

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