Colombia Eyes $500 Million in Energy Spending in Shale Gas

Colombia, South America’s third- largest producer of oil, expects this year’s auction of so- called unconventional energy reserves to attract at least $500 million in investment.

Royal Dutch Shell Plc (RDSA), Exxon Mobil Corp. (XOM), and Chevron Corp. (CVX) have shown interest in Colombia’s reserves of gas trapped in shale rock and other unconventional sources, government Hydrocarbons Director Julio Cesar Vera Diaz said yesterday in an interview in Cartagena in northern Colombia.

“The blocks could easily draw hundreds of millions of dollars,” Vera Diaz said. “We have potential.”

President Juan Manuel Santos is taking advantage of energy and metals reserves to draw record international spending to Colombia, including by billionaires Eike Batista and Carlos Slim. Improved security has enabled Ecopetrol SA (ECOPETL), Colombia’s largest oil producer, and other companies to explore for fuel in areas that were off-limits a decade ago, Ecopetrol Chief Executive Officer Javier Gutierrez said this week.

About 30 onshore blocks of 109 blocks the nation will auction for exploration and production hold natural gas trapped in shale-rock formations or oil shales, Vera Diaz said. Colombia aims to surpass Argentina in production of such fuels, he said.

“We have the conditions to guarantee investment,” he said.

Commercial Production

Ecopetrol, Colombia’s largest oil company, is in the early stages of searching for unconventional fuels in central Colombia, Gutierrez said this week. Companies are drilling for unconventional fuels in Colombia and the first commercial production probably will start next year, Vera Diaz said.

In northern Colombia, Drummond Co. aims to extract methane from coal beds to fuel its operations, he said. Colombia is South America’s largest supplier of coal.

World energy demand is expected to increase by one-third by 2035, according to the International Energy Agency. Venezuela and Brazil are South America’s largest oil producers.

Ecopetrol slid 0.4 percent to close at 5,280 pesos in Bogota. Crude oil for April delivery declined 32 cents to $105.11 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 6.

To contact the reporter on this story: Heather Walsh in Bogota at hlwalsh@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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