Not all Latin American activity is in Brazil. View of the Vaca Muerta, an extensive shale, unconventional resource play in the Neuquen Basin in west-central Argentina is among South America’s hottest plays.
Latin America offers some of the most promising and most perplexing exploration prospects on the planet. AAPG’s upcoming International Conference and Exhibition in Cartagena, Colombia, will be held at the corner of the continent with a view toward the heart of the action.
Geology represents only a piece of the puzzle in Latin American oil and gas plays. Politics, production challenges, anti-industry public opinion and difficult pathways to markets can complicate matters.
Remote and sometimes rugged exploration terrain onshore requires careful logistics by operators.
AAPG member Miguel Ramirez, a co-general vice chair of the AAPG meeting, is an adviser to ExxonMobil de Colombia and president of AAPG’s Latin America Region.
There are two government models in Latin America, Ramirez noted: “A more statist and interventionist style of government – Venezuela, Bolivia, Ecuador and Argentina – and more free markets, free enterprise-oriented governments – Mexico, Colombia, Brazil.
“Companies should pay attention also to countries where the rule of law and sanctity of contracts is upheld,” he added.
Despite the challenges, Latin America retains its attraction for exploration investment. Ramirez cited three active and emerging areas.
♦ First, “Sub-salt plays in the offshore Atlantic margin of South America, in particular Brazil. This may also extend into Uruguay.”
♦ Second, “Heavy oil in the sub-Andean basins, extending from Venezuela, Colombia, Ecuador and Peru. The potential is large as evidenced by the Rubiales field in Colombia.”
♦ Third, “Sub-salt and salt-related plays onshore and offshore in Mexico.”
He also sees a promising future for unconventional resource plays in Latin America, a region already known for its heavy-oil production.
“The potential is huge in the Cretaceous La Luna and equivalents in Venezuela, Colombia, Trinidad and Tobago, Ecuador and Peru and the Vaca Muerta in Argentina,” he said. “The issues facing unconventionals in South America are probably more political – environmental, regulatory, community relations – than technical.”
Challenges and Success Stories
Colombia illustrates the opportunities and challenges for the oil and gas industry in Latin America.
It has become one of the most attractive areas for international exploration investment. In a significant hydrocarbon success story, the country’s oil production surpassed one million barrels/day this year.
That ramp-up reversed a worrying decline in oil production and met a longtime goal of the Colombian government. Encouragement for exploration, better terms for producers and an improved business climate contributed to the growth.
But also key was a decline in the number of attacks on pipelines and other oil-industry infrastructure by Colombian rebel groups, notably the Fuerzas Armadas Revolucionarias de Colombia, or FARC.
Those groups remain active, and could impede future gains. In May, pumping stopped on Colombia’s second-longest oil pipeline, Cano Limon, after rebels reportedly used dynamite to blow up part of the line near the Venezuelan border.
A struggle within the industry involves state oil company Ecopetrol and Toronto-based Pacific Rubiales Energy Corp., Colombia’s largest oil and gas independent, over the future of the giant Rubiales oil field in the Llanos Basin.
Rubiales was discovered by Exxon in 1981 in association with the Tethys operating group. Coplex Resources later acquired the field and drilled a handful of wells, but was unable to fund a full development program.
The Tethys group regained the field, and then was acquired by Rubiales Holdings, which became Petro Rubiales Energy. A merger between Petro Rubiales and Pacific Stratus in 2008 produced Pacific Rubiales Energy.
Pacific Rubiales owns Meta Petroleum Corp., which operates the Rubiales, Piriri and Quifa heavy oil fields in the Llanos Basin, and Pacific Stratus Energy Colombia Corp., operator of the La Creciente natural gas field in the northwestern area of Colombia.
It has acquired PetroMagdalena Energy Corp. and C&C Energia Ltd., which have light oil assets in Colombia, a controlling interest in CGX Energy Inc., with a large acreage position in Guyana, and holds producing and exploration assets in Peru, Guatemala, Brazil and Papua New Guinea.
An aggressive drilling, workover and production-upgrade campaign by Pacific Rubiales and Meta Petroleum helped turn the Rubiales field into Colombia’s biggest and most important oil producer.
Ecopetrol and Pacific Rubiales have worked together as partners in the Llanos Basin, but some industry watchers believe that Ecopetrol will attempt to become Rubiales field operator when current concession agreements expire.
That might be a non-event; Pacific Rubiales expects the field to go into natural decline starting in 2015.
The Llanos Basin remains an attractive exploration area for companies in and outside of Colombia. Notable drilling successes this year include:
♦The Puerto Gaitan-1 exploratory well on Llanos CPO-06 Block found hydrocarbons in the upper sands of the Mirador formation and in the lower and middle C7 sands of the Carbonera formation. In an initial production test, the well flowed 367 barrels of oil/day from the lower sands.
Puerto Gaitan is the first of a nine-well drilling program on the CPO-06, CPO-07 and CPO-13 Blocks operated by Tecpetrol Colombia.
♦ P1 Energy Corp. of Calgary, Canada, and partners made a Mirador oil discovery on the Llanos 32 Block. The Bandola-1 well, near the group’s earlier Maniceno discovery, went on production in April at 2,600 barrels/day. Total depth was 11,594 feet.
♦ GeoPark Holdings Ltd., with a subsidiary in Bogotá, drilled its Max 2 well to 10,866 feet in Llanos 34 Block. Initial oil production from the Guadalupe formation was 1,532 barrels/day. The Max field was discovered in 2012 with the Max 1 well, now producing at about 1,031 barrels/day.
Another emerging exploration area is the Magdalena basins area in western Colombia. On the Guama Block in the Lower Magdalena Basin, Pacific Rubiales has targeted the Miocene Porquero Medio C and D sandstones and siltstones, a low-permeability play successfully tested by several exploration wells.
Earlier this year, the company said its Manamo-1X well reached total depth at 7,600 feet and found 251 feet of net pay averaging 18 percent porosity, across a gross interval exceeding 400 feet. The well reached a maximum flow rate of 4.9 million cubic feet/day and 296 barrels of oil/day.
And in the Middle Magdalena, Canacol Energy Ltd. of Calgary has teamed with ConocoPhillips Corp. to explore for shale oil on part of Canacol’s 334,000 net-acre holding.
ConocoPhillips will carry the cost of the drilling, completing and testing up to 13 wells.
Colombia’s newest frontier lies in the Caribbean offshore, where Ecopetrol and several large exploration companies plan activity. Ecopetrol and Anadarko Petroleum Corp. have already announced a partnership agreement to explore two blocks in the Caribbean Sea.
Most of the offshore exploration is in early stages, however, and Ecopetrol does not expect offshore Caribbean exploration to contribute to its production until about 2020.
AAPG’s international meeting will feature information forums on Colombia and other Latin American countries. Ramirez said the Cartagena ICE is unique in also having a regulators forum, a National Oil Company (NOC) forum and an Independent Oil Company (IOC) forum.
“The country-specific forums will provide a great opportunity to learn what is going on,” he said. “These sessions also will provide an opportunity to network with the dealers and wheelers of the region.”