Royal Dutch Shell Plc (RDSA) and Spain’s Repsol SA are among winning bidders at Colombia’s first government auction of oil and natural gas blocks in two years as the country seeks investment to boost reserves.
South America’s third-largest oil supplier is also granting licenses to state-controlled Ecopetrol SA, Gran Tierra Energy Inc. and other producers after offering 115 blocks, according to preliminary results on the National Hydrocarbons Agency’s website. The blocks offered today include more than two dozen areas holding oil and natural gas trapped in shale rock. The final list of companies awarded blocks will be published next month.
Colombia, whose oil output has jumped 72 percent since 2007, is seeking to boost reserves to ensure that production will keep rising after improved security drew record international investment. The nation’s reserves of about 2.3 billion barrels are equivalent to almost seven years of output, lagging those of smaller producers Ecuador and Argentina, U.S. government data show.
“Seven years is a relatively small amount for a country that depends a lot on oil,” Juan David Pineros, an analyst at the nation’s largest brokerage, Interbolsa SA, said yesterday in a telephone interview from Medellin, Colombia. “It’s a big step to ensure future reserves.”
Shell outbid companies including Ecopetrol (ECOPETL) to garner an exploratory block in the Caribbean off Colombia’s northern coast. Ecopetrol submitted the top bid for areas including a shale-rock block in an eastern province near the Venezuelan border.
The Hague-based Shell is targeting areas that have “future potential” in Colombia, Kelly OpDeWeegh, a Houston-based U.S. media relations officer for the company, said by e-mail. Dana Coffield, chief executive of Gran Tierra, didn’t respond immediately to an e-mail seeking comment. Officials at Ecopetrol didn’t immediately respond to an e-mail asking for comment.
Colombia’s government is auctioning the blocks as it begins peace talks today in Oslo with the nation’s largest guerrilla group, the Revolutionary Armed Forces of Colombia, in a bid to end an armed conflict in its fifth decade. Rising rebel sabotage of oil pipelines this year prompted Ecopetrol, which funnels revenue to government coffers, to cut its 2012 production target to 780,000 barrels of oil a day from 800,000 barrels.
Blocks were awarded based on proposals for investment and the government’s share of production.
Colombia sought to award rights to blocks covering about 13.5 million hectares (33.4 million acres) across mountainous central Colombia, its eastern plains and offshore in the Caribbean, according to the Bogota-based National Hydrocarbons Agency. Some blocks sparked competing offers while others, including some unconventional blocks, had no bidders.
The auction sought to draw $500 million of investment in unconventional reserves, the government said in March. Ecopetrol, Colombia’s largest oil company, already is seeking partners to drill for the fuels.
A surge in production of shale gas in the U.S. is leading companies to search for new sources overseas, Pineros said. Production and reserves of U.S. shale gas more than quadrupled in 2010 from 2007, according to the website of the U.S. Energy Information Administration.
Colombia expects to produce more than 1 million barrels a day of crude at the end of December, Energy and Mines Minister Federico Renjifo said last week. Output was 956,300 barrels a day in September.
Venezuela and Brazil are South America’s largest oil producers. Ecuador and Argentina surpass Colombia in crude reserves, with 6.5 billion barrels and 2.5 billion barrels, respectively, according to figures from the U.S. Energy Information Administration.
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