Francisco José LLOREDA

Colombia requires a diversified approach that includes conventional and unconventional resources. Offshore and unconventional plays are important, but the search for hydrocarbons in conventional sites must continue at the same pace.

Francisco José LLOREDA President ASOCIACIÓN COLOMBIANA DE PETRÓLEOS

in figures

Colombia’s 2014 oil reserves-to-production ratio:6.4 years

Colombia’s 2014 natural gas reserves-to-production ratio:10.5 years

Goals for Colombia’s hydrocarbons

December 15, 2015

Colombian Oil & Gas Association president Francisco Lloreda talks to TOGY about the future of the country’s hydrocarbons industry and the importance of striking a balance between conventional and unconventional resources. The organisation brings together private companies working in the exploration and production, transportation and distribution sectors.

What is the 2016 outlook for hydrocarbons production in Colombia?
Production will start to decrease in 2016 because exploration activity in 2015, while growing, was below what the country required. Unless there are important incentives that allow a significant growth in development wells, production will start to fall in the mid term.
The Colombian government and industry players have been working to put measures in place that offset the impact of low oil prices and ensure the country does not lose competitiveness in the eyes of investors. Some measures concerning time flexibility in contracting periods and redirecting investment commitments have already been adopted. Others, linked to guarantees and measures for tax incentives for exploration and production, are being researched.
However, the effects of these measures will not be noticeable until years from now. These approaches are ensuring the best possible mid- and long-term outlook for the domestic oil and gas industry.

What role do unconventional resources play in the Colombian market?
Studies indicate that Colombia has great potential for unconventionals, but the feasibility of extracting these resources is still uncertain. The country is ready to start implementing hydraulic fracturing technology, but it has some of the most demanding exploration terms in the world, which might discourage new investment.
Colombia requires a diversified approach that includes conventional and unconventional resources. Offshore and unconventional plays are important, but the search for hydrocarbons in conventional sites must continue at the same pace.
Enhanced recovery at conventional fields is also key. There are interesting prospects in some departments, such as Putumayo, where Colombian upstream company Vetra Energia and Canadian operator Gran Tierra have been working.

 

What can Colombia do to boost interest in exploration?
It might not be feasible to develop offshore fields under current conditions, especially with regards to gas. The same goes for unconventional fields.
The Colombian Oil & Gas Association and the government are working to implement measures that will ensure competitiveness and make the market more attractive to investors, especially in the face of regional competition.
If this requires a review of the whole model, we should go for it. The country will need to revise taxation, royalties and exploration terms. The Ministry of Mines and Energy understands this is important.

What priorities must be met in Colombia’s oil and gas industry over the coming years?
The Colombian Oil & Gas Association has outlined three industry objectives. The first is to achieve a sustainable and profitable production increase at existing reserves. The second objective is to ensure infrastructure that matches industry needs. The third is to have a competitive and efficient wholesale distribution sector for oil and lubricants.
To do this, some major challenges have to be addressed. The tax and royalty regimes must be revised and transport infrastructure, such as roads and hydrocarbons pipelines, need to be modernised. As Colombia’s main export market will soon be Asia, we must improve infrastructure that leads to the Pacific coast.
Operating conditions on the ground must also be tackled. Despite a reduction of attacks on infrastructure, illegal blockades requires a larger government presence to avoid further setbacks to companies’ operations. Lastly, facilities for logistics and services have to be established to support costly offshore developments.

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