Colombia Woos Deep-Water Drillers With Improved Contracts

Royal Dutch Shell Plc (RDSA), Repsol SA (REP) and BG Group Plc (BG/) are among international oil companies to express interest in Colombian deep-water blocks after contract terms were sweetened, a government official said.

Companies drilling in deep water will be able to recover 200 million barrels before the government begins taking a 30 percent royalty, with operators in ultra-deep water allowed 300 million barrels, said Deputy Energy Minister Orlando Cabrales.

Colombia is increasingly looking to offshore and shale fields to maintain production growth as it struggles to find major new onshore deposits of conventional oil. Under existing license rules, royalties for deep-water and ultra-deep-water blocks kick in after five million barrels.

“We were uncompetitive with the current terms,” Cabrales said in an interview yesterday in Houston. “We had to adjust it up to be competitive.”

Petroleo Brasileiro SA (PBR), Ecopetrol SA (ECOPETL) and Anadarko Petroleum Corp. (APC) have also expressed interest in 13 offshore blocks Colombia will auction in this year’s bidding round, Cabrales said. Three blocks will be located off the Pacific coast, with 10 in the Caribbean.

The improved terms will see the threshold above which royalties are paid increased to $82 per barrel for deep-water, from $45 now, and $100 for ultra-deep-water, Cabrales said.

To contact the reporters on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net; Andrew Willis in Bogota at awillis21@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net; Dan Stets at dstets@bloomberg.net

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