Colombia Looking to Sweeten Terms for Deepwater Contracts

Colombia is working to sweeten contract terms for oil and gas companies looking to exploit its harder-to-reach deepwater reserves at an auction this year.

Royal Dutch Shell Plc, Exxon Mobil Corp. and ConocoPhillips are among foreign producers interested in bidding at the July auction of 97 offshore and onshore blocks, Javier Betancourt, head of the Hydrocarbons Agency, said yesterday. Terms for conventional and unconventional contracts will remain the same as a 2012 bidding round.

“Our current offshore position isn’t the most competitive; we’re working to improve it,” Betancourt said in an interview in Cartagena. “There’s a marked interest from the big players in Colombia’s unconventional and offshore.”

The 2014 auction will include about 10 offshore blocks in the Caribbean and three in the Pacific, as well as 19 unconventional blocks, located primarily in Colombia’s La Luna shale formation, Betancourt said. Exxon Mobil, Shell and ConocoPhillips “have shown interest in the round in general, not only in unconventional but also offshore,” he said.

The three companies declined to comment when contacted by Bloomberg.

“In reserve volume terms, the big discoveries in the last few years have been offshore, as well as the unconventional revolution in the U.S.,” Betancourt said.

Coal-Bed Methane

Some 57 conventional blocks are set to be auctioned in the round, with locations mainly spread across Colombia’s southern Putumayo province, the Middle Magdalena Valley, the Llanos plains and Pacific and Atlantic coastal areas, Betancourt said.

The hydrocarbons agency also plans to auction six to eight coal-bed methane blocks after the main July round, seeking to follow in the footsteps of the U.S. and Australia where the energy source is being exploited.

Mexico’s imminent energy industry opening means the country will become an important player, with the additional supply contributing to a “buyers’ market” for energy companies looking for new contracts, Betancourt said.

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