Colombia Oil Block Auction Favorable To Companies

BFP Magazine

  • Oil discoveries in Colombia

    Colombia Oil Block Auction Favorable To Companies

    Source: Dow Jones

    Friday, September 21, 2007

    Colombia granted rather favorable conditions to oil companies at an oil and gas block auction Tuesday, Monica Araujo, an oil analyst at the Ativa brokerage in Brazil said Thursday.

    "The country really wants to attract investment to the oil sector and thus did this auction at a very low cost for companies," Araujo said.

    Colombia is seeking to increase its oil and gas reserves amid a decline in production.

    Oil companies that took part in Tuesday`s auction don`t need to make an initial payment for the blocks, and only have to commit themselves to a $5 million-per-block investment as well as a royalty payment of up to 16% of a possible future production.

    Brazil`s state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, won stakes in four exploration and production blocks at Tuesday`s auction in Colombia, the company said in a late Wednesday release.

    The company will be operator with a 40% stake in the RC-06 and RC-07 blocks, in which Colombian state-oil firm Ecopetrol and U.S.-based Hess Corp. (HES) each have a 30% stake.

    Petrobras will also have a non-operating 30% stake in the RC-04 block and a 20% stake in the RC-08 block.

    The oil blocks lie off Colombia`s Caribbean coast and close to the Petrobras-operated Tayrona block where the company has already started exploration drilling.

    "Petrobras` outstanding participation in the auction shows its interest and trust in Colombia, where it widens it exploration portfolio aiming at increasing its reserves and production," the company said in the release.

    Yet, Petrobras` exposure in Colombia still has little relevance as part of its overall international activities, Ativa`s Araujo said.

    The company in August produced an average of 16,587 barrels of oil a day in Colombia, out of an overall overseas oil and gas output of 242,055 barrels of oil equivalent a day.

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