News and AnalysIs for

Interoil has been telling the market they are getting out of Colombia for several months now. Yesterday they announced the sale of their exploration assets to Trayectoria Oil and Gas. Interoil says they received US$2M in cash for its working interest in the Altair and COR-6 blocks and avoided US$26M in exploration costs. The transaction is subject to approval by creditors and the ANH. Their working interest in the producing block LLA-47 is still on the market.

Radio Nacional de Colombia reports that according to the Colombian Petroleum Association (ACP), foreign investment will decline despite the country’s reserves increasing this year. Oil industry representatives said that “with the drilling of 135 new wells, the oil industry hopes to increase hydrocarbon reserves, currently estimated at 2,200 million barrels,” adding that “findings such as those achieved by Canacol in January 2012, in the Magdalena River middle valley with a daily production of 1,242 barrels per day, reinforces the official forecasts that the country could reach 41,000 million barrels in 2030.”

Gran Tierra recently issued a press release on its reserves for year-end 2012. The good news is that the company’s Colombian oil reserves 2P (Proved and Probable) are up 34% over 2011. Proved (P1) reserves are up 22% and Probable (P2) are up 85%. The bad news is that Colombian 2P gas reserves are down 64% although Proved gas reserves are only down 35%. Gas now represents only 5% of the company’s Colombian 2P reserves. Argentina gas reserves have also declined but the growth in oil in Colombia, Argentina and Brazil is sufficient to push 1P reserves up 20% and 2P reserves 15% on a total company basis. The official long-form filing may not appear until the end of this month and the company gave no explanation of the decline in gas reserves in its press release.

The Hydrocarbons International Forum ‘Perspectives and value of companies in the sector’, organized by the School of Advanced Management Studies (Cesa) with support from the University of Alberta’s School of Business, will be held in Bogota on February 20. The forum will discuss investment opportunities in the mining and energy sector, access to capital markets for companies in Colombia and the valuation of oil companies in the global arena.

Business newspaper Portafolio reported that Paula Acosta, deputy director of National Planning Department (DNP), said the National Royalties Fund has 1,000 pending projects amounting to US$727B, even though after the royalties reform Legislative Act was issued, the government decided to liquidate it next December. (This is the fund for the old distribution scheme.)

Colombia lacks transport infrastructure of all kinds from roads to railways to ports. Railways are long-term projects so roads will have to carry the freight for several years. The country ranks last in the region for having four-lane highways so there is a desperate need for many investments. It looks like the next phase may actually be getting off the ground, at least in terms of tendering. From a MinTransporte press release, translated and with commentary by Hydrocarbons Colombia.

We are interested in infrastructure – especially high capacity infrastructure like rail – because, for all of the country’s positive attributes, Colombian transport infrastructure can only be described in words that are inappropriate for a public forum like this website. This particular railway – the Carare railroad – will start central Boyacá, go to Barrancabermeja and then follow the Magdalena River valley to the coast. That makes it important for transport to Bogotá and important for the hydrocarbons industry if unconventional extraction ever gets off the ground. From a MinMinas press release, translated and with commentary by Hydrocarbons Colombia.

Business magazine Dinero reports that Ecopetrol agreed to finance in pesos US$1B of its US$2B investment budget for this year, after the government recently requested the company to finance its operations in local currency instead of dollars (as we reported). The announcement was made by Minminas Mauricio Cardenas, who said that the projects will be funded: “The vast majority, over 50%, hopefully more than 60%, will be in local currency.”

Multiple sources in the Colombian news media reported that Ecopetrol awarded business group Empresas Públicas de Medellín (EPM) a contract to build, maintain and operate two power lines that will transport electricity to the Barrancabermeja refinery. In the coming days, EPM will begin environmental procedures for the construction project, which will have a 230,000-volt substation and 250-MW-capacity lines 10-kilometers long .

As reported by newspaper Portafolio, a delegation of UK Export Finance, the United Kingdom’s Export Credit Agency, visited Colombia in order to explore possible investments in the country in the areas of infrastructure, mining, oil and gas. The agency also provides financing services to Colombian companies that want to purchase equipment from British companies.