Last year started with promise for the Colombian offshore industry.
Shell EP Offshore Ventures Limited and Ecopetrol, S.A. signed an agreement for Shell to acquire an interest in and operate the Fuerte Sur, Purple Angel and Col-5 blocks located in the southern Colombian Caribbean basin.
Noble Energy opened an office in Barranquilla and announced plans to drill a prospect at 8,500 feet on the Col-3 block in the Guajira Basin in northern Colombia.
Ecopetrol and Petrobras prepared to mature the 2014 Orca discovery on the Tayrona block, also in Guajira.
Then COVID-19 came to the Americas in March 2020, and everything changed.
Operations were curtailed, some workers went home and falling oil prices led to budget cuts, mergers and acquisitions and changes to the offshore landscape around the world.
In the months that followed, Colombia’s National Hydrocarbon Agency (ANH) postponed licensing rounds. Repsol relinquished its stake in GUA OFF 1 in the Guajira, and Petrobras initiated the process to sell its working interests in Tayrona. Occidental Petroleum sold onshore assets to reduce debt and has kept quiet about plans for blocks held offshore. Chevron Corporation merged with Noble Energy and began working with partner Shell to assess acreage acquired on blocks Col-3 and GUA OFF 3.
Now, one year later, the scenario has changed, but Ecopetrol and Shell plans have not. With a shared vision for natural gas as a fundamental component of the energy transition, the companies are preparing a drilling campaign designed to build Colombia’s gas reserves.
COVID’s Impact on Ecopetrol
Jorge Calvache, Ecopetrol’s vice president of exploration, said that COVID-19 and the collapse of oil prices worldwide had a dramatic impact on the company’s activities offshore.
“Like the industry in general, Ecopetrol went through a thorough revision of the 2021 investment plan, streamlining all projects that did not meet the company’s new criteria. Consequently, projects were reprogrammed, in agreement with our partners, taking in consideration lead times required to obtain permits, materials and rig contracting,” he said.
In late 2020, Ecopetrol conducted environmental monitoring on all future offshore drilling locations. The company hired a contractor to ensure that operations followed all health and safety protocols established by Ecopetrol and Colombian health authorities.
“We are proud to say that the environmental monitoring was performed as planned, and activities carried out successfully without risking our employees’ and partners’ health and safety,” he said.
While preparing the offshore locations, Ecopetrol also prepared technical and administrative teams to work from home.
Calvache said the company shifted to remote work quickly thanks to a digital management plan implementation that began in late 2019.
“Having the plan in place at the time of the first lockdown in March allowed employees, especially offshore G&G teams, to move quickly into a remote work mode,” he said. “Not all was moonlight and roses, but the fact that there was a team already working on this digital transition helped us solve technical problems quickly and effectively.”
The teams adapted quickly to the new norm, meeting their 2020 objectives and targets, and Ecopetrol implemented a series of programs to support employees during the transition.
Open for Business
Calvache noted that employees and partners have adapted well to the new environment, and they expect 2021 to be a good year, both for the company and for Colombia.
“Ecopetrol remains very optimistic of the opportunities that Colombia offers. These are diverse, ranging from low risk/low reward, such as near field prospects in the more mature basins, to high risk/high reward, as in the complex structural domains of the foothills or in the offshore,” he said.
“The Caribbean offshore basins present exciting and challenging opportunities that are still to be explored. Most of the offshore can be considered as frontier exploration, while regions with important gas discoveries such as Purple Angel, Gorgon, Kronos and Orca are considered emerging,” he added.
Calvache said that Colombia provides a variety of options for companies who are interested in exploration and seek a country with a stable business environment.
“Colombia continues to be attractive thanks to the deal flow that exists within our industry and also to the characteristic political and fiscal stability that the country offers,” he said.
“Onshore, the larger companies have made way for smaller and more lean ones, which have proven to be successful even through hard times. Offshore, Shell’s recent farm-in to Ecopetrol’s blocks COL 5, Purple Angel and Fuerte Sur in the Sinú Basin is an indication that Colombia still has quite a lot to offer for the majors,” he added.
Exploring Opportunities Together
Victor Vega, South America regional exploration manager at Shell Americas, was part of the team that signed the farm-in giving a Shell a 50-percent working interest in the Col-5, Purple Angel and Fuerte Sur blocks. He noted that the agreement is part of a larger strategy of collaboration between the two companies.
“We have expanded our relationship with Ecopetrol over the last few years in several countries including the USA (Gulf of Mexico), Brazil and now in Colombia,” he said. “We believe this partnership provides an opportunity for both companies to complement each other, with Shell bringing our deep-water expertise and Ecopetrol bringing all their knowledge of the Colombian offshore.”
Vega noted that there are many factors that make the Colombian offshore exciting.
“In the last decade, seven deep-water and three shallow-water wells have been drilled confirming the potential of hydrocarbons,” he said. “The discoveries have demonstrated some potential, but we are in the early stages of exploration. Shell wants to be a part of this process to unlock the hydrocarbon potential and be part of the energy transition aspirations for Colombia.”
Vega noted that early stages of exploration and gas discoveries made in 2017 and 2018 provide evidence of hydrocarbon potential, but additional work is needed to reduce remaining uncertainty, both in areas with discovered resources as well as in new areas.
“We have done extensive technical work trying to understand the regional geology and how this basin fits within our portfolio, and for that we have acquired an extensive dataset that includes 3-D seismic data, piston coring and other data,” he said. “In the blocks with Ecopetrol we are also incorporating the existing data that has been acquired by Ecopetrol historically, including a recent 3-D seismic acquisition (2019) in the Col-5 license, which is now being analyzed and will be incorporated in our final view of the potential of this block.”
Shell plans to reduce uncertainty in the Gorgon discovery by spudding a well in 2021 and following up later with a production test.
What Is Needed to Be Successful
According to Vega, the success of the Col-5/Purple Angel/Fuerte Sur project depends on several factors.
“Of course, we first need to get conclusive results from the Gorgon-2 production test. But, we will also need a competitive and flexible regulatory framework for offshore gas commercialization in order to be successful. So, we hope that government, industry and regulators will continue working collaboratively to ensure that this strategic project for the country successfully supports energy security aspirations for Colombia,” he said.
“Lastly, there is also a need to secure the necessary transportation infrastructure that will enable connection between this project and any existing and future gas customers,” he added.
Calvache said that offshore exploration and development continues to be a priority for Ecopetrol.
In the next 18 months, the company and partners plan to drill at least two offshore exploration/appraisal wells to shore up reservoir knowledge and confirm volumes. In addition to the project with Shell, the company is preparing to drill on the Tayrona block further north.
“The next couple of years will be very important to confirm the gas potential of the Colombian offshore with the appraisal of Kronos-Gorgon and Orca,” he said. “If economically viable volumes and well-production rates are proven, development of these discoveries will provide a new impetus to the oil and gas industry in Colombia, bringing prosperity and economic growth to the Caribbean region and the country, as well as benefits to our shareholders.”
“If predictions prove to be true, Ecopetrol can become an important gas player in the country, and Colombia a gas exporter for the region,” he added.
Sharing Best Practices
Ecopetrol and Shell will share information about their offshore activities at Exploration and Development in Southern Caribbean Frontier Basins, a virtual technical symposium organized by AAPG’s Latin America and Caribbean Region and the Colombian Association of Petroleum Geologists and Geophysicists on March 17-18, 2021.
The event, originally set to take place in Barranquilla in March 2020, was postponed because of COVID-19. The program features some of the presentations planned originally, as well as new technical information and important updates about how business conditions have changed over the past year.
Enrique Velásquez, ACGGP president and consultant at the University of Caldas for the ANH Frontier Basins Evaluation project, noted that while the COVID-19 pandemic slowed exploration and development activities in Colombia, the primary impact was on onshore activities, and the offshore sector remains strong.
“Current business environment in Colombia is very good, however more bid rounds are needed in order to dynamize exploration,” he said.
Discussions related to more bid rounds are sure to surface during the symposium, which, in addition to technical sessions, features special presentations from ANH and Ecopetrol and a panel discussion, “Government-Industry Strategies to Promote Colombia’s Offshore Sector.”
Velásquez described the symposium as a good opportunity for geoscientists to learn and share experiences.
“I would like to learn new things about what the majors have done in similar geological environments, which could be applied in Colombia’s offshore basins,” he said.
Velásquez also looks forward to showing people from around the world all that Colombia has to offer.
“Colombia’s offshore basins have a huge opportunity if companies focus their exploration in crude oil rather than gas,” he said, adding that while he understands Ecopetrol’s focus on gas as a long-term solution, crude oil is a better focus for companies seeking a quicker return on investment.
Preparing for the Transition
Calvache acknowledges that offshore projects can be expensive and risky, particularly during the current business environment, but noted that keeping the big picture in mind is crucial for long-term success.
“The main driver is the energy transition process that is slowly taking place globally, and gas is the selected fuel for this purpose,” he said.
“Colombia needs new gas reserves to secure and leverage this new reality, and the offshore presents, so far, the best option for capturing these resources. Offshore exploration is part of Ecopetrol’s long-term strategy and as such it must persist despite the current, unfortunate yet temporary circumstances,” added Calvache.
For program and registration information for the Colombia 2021 Virtual Research Symposium, see aapg.to/colombia2021.