TBY talks to María Victoria Riaño, President of Equión Energía, on offshore potential and development in Colombia.
THE BUSINESS YEAR Can you assess the opportunities for offshore exploration in Colombia?
MARÍA VICTORIA RIAÑO There are offshore activities in both the Pacific and the Caribbean region, though resources in the Caribbean are more advanced now. The first site that started producing was Chuchupa, just off the Guajira peninsula, and it was, and continues to be, a Chevron venture. Chevron provides approximately 70% of the gas in Colombia, and it has played an important role in the development of the gas industry since that discovery in the 1970s. From this field gas is exported to Venezuela. What is happening, however, is that production in this field is declining. That is the first challenge for us in Colombia. On top of that, we at Equión provide 30% of the gas in the country. In terms of private companies, we are the second largest domestic gas supplier. We know how to manage this market, and we know how to manage gas. Knowing that sector and knowing how to commercialize this commodity gives us special experience. The two companies that have this experience are Chevron and Equión. For now, the main challenge is to replace this declining field. We are looking along the shore to replace this gas, and have two blocks on the Caribbean coast now. In the first exploration area, RC5, we are looking for gas. Of course, it is a relief for the country to have another source and a firm that can produce gas apart from Chevron. That is our challenge; it is not just an exploration project, it is a project that can help provide Colombia with energy security over the medium to long term. Equión also works with international contractors like Schlumberger and Corinne Martin. We have everything ready, and we hope that the weather conditions improve so we can have good news for this country.
What should be done to maximize Colombia’s offshore opportunities and potential, and how important do you think synergies are in these efforts?
Developing synergies between the companies and between the blocks is a very important point. We don’t have a huge area like the Gulf of Mexico, the North Sea, or other locations where there is a lot of exploration, development, and production for contractors; those are very easy places to have jack-ups, for example. There is less movement in Colombia. We need to coordinate with other companies on how we are going to develop Colombia’s offshore resources. We need to coordinate and communicate in order to bring in the companies and equipment we need here for long-term business, not just for three or six months. We need to show contractors that we can offer long-term contracts. We have started talking to the National Hydrocarbons Agency (ANH) and established a “Rig Club,” and by doing this we can better coordinate all stakeholders. This is the way to achieve a high level of offshore development in Colombia. Everything has to be coordinated, and this also includes environmental licenses and community permits. Now that we have this group, we have established an open line of communication with the government.
What are the primary challenges that you face in realizing the full potential of energy exploration and production?
The companies need to be well coordinated with each other and with government institutions. When dealing with permits or environmental licenses, the government approves the things we need to be coordinated. Another challenge is coordinating with communities. The consultation process, prior to the initiation of a project, must be handled with care. When you arrive in a new area, it is a challenge to understand the needs of the communities, and this takes time.
What level of investment are you looking to make in the medium term?
For the time being we have two blocks, RC4 and RC5. The short-term plan is to invest about $150 million in exploration, but we are in the middle of studies and approvals on RC4, which is a deep-water project. If the approvals go through this will be an $80 million to $100 million project. In RC5, the Mapalé 1 exploration well startedon August 3 and should be able to show some information in the first quarter of 2013. We would like to develop more than one well, but it will depend on weather conditions.
What is the production in your onshore block in Casanare province?
All of our production is there now, and it operates at the equivalent of 100,000 barrels per day (bbl/d). It’s approximately 50% gas and 50% liquids. From that production, almost 20,000-30,000 bbl/d equivalent belongs to Equión, with the rest belonging to the other partners. We have had these contracts for 25 years, and these contracts will expire in the coming years—the first one in 2016. The big challenge with those fields—the mature fields that will expire first—is to bring in the technology to get more from them. Equión is working with leading companies such as Baker Hughes, Halliburton, and Schlumberger; although our company doesn’t develop this kind of technology, we work very closely with our partners. We get together with all of the contractors and find different ways to increase the recovery factor. The first challenge is in handling the mature phase of these fields. We have a big development in the last license, expiring in 2020, which we call Piedemonte (foothills). Those wells are very deep. This means we drill to maybe 20,000 feet from the top of the mountain, meaning big rigs, and each well takes about eight months to drill. The geology is not easy. The layers are not clearly delineated, and the terrain is very faulty. It’s in the middle of the mountains, so it’s not easy, but the company that has the experience to do this kind of work is Equión. Our company also does a lot of community development and build roads. We are receiving very good resources from each well, and each well could yield between 5,000 and 12,000 bbl/d if things go well. Each well could cost $80 million, so it is a big investment. If you compare that to other operators in Colombia that drill in flatter areas, their costs are only $5 million or $10 million—but they don’t find as much. In flatter areas the costs are lower per well, but not as productive. Also, they are producing heavy oil, so it has to be blended. Here, it is a gas condensate—liquid with gas. We have to handle the gas, and then re-inject it. In the other areas it is just liquids, so it’s easier. When you have gas you have more challenges, and you have to build facilities to re-inject the gas. A lot of technology and experience is required in order to manage these types of fields.
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