Colombia Emerges a Major Oil Power Despite Problems

TAURAMENA, Colombia _ Once defined by creeks and cow paths, the arid landscape of the Andean foothills near Tauramena is now marked by helicopters, drilling rigs and the cowboy boots of American oilmen.

Foreign oil companies are drilling three miles down, tapping into a sea of low-sulfur crude oil capable of making Colombia a major oil supplier to the United States.

"The U.S. could import 10 percent of its oil from Colombia by the end of this decade," said Thomas G. Finck, president of Triton Energy Corp. of Dallas, who flew to Tauramena last month for the inauguration of a $300 million oilprocessing operation. The tanker trip from Colombia's Caribbean oil port to refineries in Texas and Louisiana takes four days.

With production in the United States at its lowest level in four decades, the emergence of a nearby source of clean-burning oil is increasingly important for Americans. Last year, imports accounted for more than half of American oil consumption. And U.S. oil companies now account for 11 of the 18 largest foreign oil concerns operating in this country.

Only a decade ago, Colombia was an importer of oil. Today, it is Latin America's third-largest exporter to the United States, after Venezuela and Mexico. With most of Colombia's known oil reserves having been discovered by private companies, private investment will be essential both to maintain future exports and to explore the two-thirds of the country not yet explored for oil.

But in recent years, foreign oil companies have shied away from Colombia because of heavy taxes. The government has therefore begun to bear more of the cost of oil exploration and development. At the same time, it is planning a series of tax breaks.

And it has attracted the largest oil investment in the country's history. British Petroleum Exploration Co., with financial assistance from three partners _ Triton of Texas, Total of France and Ecopetrol, Colombia's state oil company _ is undertaking a $7 billion development in Cusiana and Cupiagua, two huge fields near Tauramena, about 90 miles northeast of Bogota, the capital.

The oil fields, which cover a thinly populated area the size of Connecticut, hold 2.1 billion barrels in proven oil and gas reserves. Ecopetrol announced late last month that probable and possible oil and gas reserves in the area totaled a further 3.9 billion barrels.

Helped by the oil investments, Colombia's economy is expected to grow 5 percent this year, the same rate as in the last two years. At the Tauramena fields, the largest confirmed in Colombia, oil production is expected to increase to 185,000 barrels a day by the end of this year from 90,000 barrels a day at present, and to 500,000 barrels a day by the end of 1997.

Colombia also offers other energy opportunities to Western companies. After British Petroleum announced the discovery of 5 trillion cubic feet of gas near the oil fields last August, the government began a $3 billion program to pipe gas to all urban households by 1997. The new find, equivalent to a billion barrels of oil, doubled Colombia's proven gas reserves.

Centragas, an affiliate of Enron Corp. of Houston, is building a $217 million, 357-mile natural gas pipeline. Fluor Daniel, another U.S. company, is part of an international consortium that has won a $310 million contract to build a second 215-mile-long branch of a national gas-pipeline network.

Still, the high cost of doing business in Colombia dampens interest in oil exploration. According to Byron E. Grote, Latin America director for British Petroleum, the Colombian government takes up to 90 percent of the value of each barrel pumped by his company. The government's revenue comes from Ecopetrol's production-sharing agreements and from corporate-income and other taxes.

In a recent study of foreign investments, the Colombian Oil Association _ which represents 18 major Western companies _ concluded that Colombia "is not internationally competitive to attract risk investments."

Since 1988, seismic studies conducted by private oil companies in Colombia have dropped by about two-thirds. The number of wildcat exploratory wells drilled has also dropped, to about a dozen last year from 52 in 1988.

The disillusionment of many foreigners with Colombia's oil conditions became clear last July when Colombia held its first auction of exploration lots. The Mines and Energy Ministry invited 150 companies to take part. Only three companies, all of them already operating in Colombia, submitted bids. Nowadays, the republics of the former Soviet Union as well as China, Vietnam and Cuba are all open to foreign oil exploration.

Colombian President Ernesto Samper Pizano seems to be listening to the oil companies' complaints. He plans to submit to the nation's Congress a bill that would exempt new oil operations from a so-called war tax of $1 a barrel on production.

The tax, enacted in 1992, helps pay for the army's defense of oil operations _ favorite targets of Colombia's leftist rural guerrillas, who demand nationalization of the oil industry and more spending for social programs in areas where oil is produced.

Last month, the government announced that Ecopetrol would also pay more of the exploration costs incurred by its private partners. Ismael Enrique Arenas, an Ecopetrol vice president, said foreign companies are now negotiating for about 10 exploration and production lots.

The test of the new operating environment will come this summer, when Ecopetrol is to hold Colombia's second international auction of exploration lots.

Oil executives who visited the remote Taumarena processing facility were divided about the effects of the new measures.

"It is definitely a move in the right direction," said Steven Sparks, general manager of the Colombian subsidiary of Helmerich

Payne, an Oklahoma drilling company.

But the president of a major Western oil company operating in Colombia was cautious, saying: "The government wants the oil money for social development. The war tax is being eliminated, but a new finance minister could come along with something new."

Copyright 1995
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