The shale boom is continuing to expand outside the U.S. Colombia has been the fastest-growing producer of oil in the Latin American region over the past five years and, thanks to its weakened rebellions, is now looking to get in on shale explorations.
The country’s first auction for exploration permits resulted in Exxon Mobil (NYSE: XOM) and the state-run Ecopetrol SA (NYSE: EC) winning bids. Colombia has, so far, not produced any unconventional energy, but it has an ambitious goal of generating unconventional reserves of 1 billion barrels within the next 20 years.
“The important thing is to get under way,” Orlando Cabrales, head of the National Hydrocarbons Agency, said in telephone interview yesterday. “Argentina is further ahead and Mexico is starting to move.”
The Colombian rebel movement is meeting this week with government mediators in Oslo; the hope is to bring to an end an armed conflict that has plagued the country for almost fifty years.
Since the rebellion has weakened, international investment in Colombian crude has increased. Oil production is up 72 percent since 2007, placing the country ahead of Argentina and fourth in Latin America, trailing Brazil, Mexico, and Venezuela.
Colombia’s oil discoveries aren’t keeping up with the increases in output. The Exxon unit and Ecopetrol jointly bid for three onshore blocks; two of them are expected to contain shale oil.
Earlier in 2012, Exxon bought shares in a block that is also likely to carry shale oil. Meanwhile, Ecopetrol’s Colombian stock has risen 35 percent since the year began.
A final list of companies awarded permits or concessions will emerge in November. Some unconventional blocks didn’t receive any bids, and lack of information about these blocks is expected to be the likely cause. The 49 blocks that did have bidders collectively pulled in around $2.6 billion in investments for exploration.
It’s a good thing that the rebellion seems to be winding down, since attacks on Colombian pipelines have been a long-standing concern. An increase in such attacks caused Ecopetrol to downgrade its 2012 output target by 20,000 barrels.
At the end of December, Colombia hopes to surpass 1 million barrels of crude per day (for comparison, September saw an output of 956,300 bpd). Foreign direct investment in Colombia has risen dramatically in the last year to $13.4 billion—nearly 40 percent of that in the oil sector.