Colombia has cracked down on press coverage of attacks on its Cano Limon-Covenas oil export pipeline, after an intense wave of rebel attacks this year.
Rebels have attacked the pipeline some 113 times this year. US Occidental Petroleum – which operates the 485-mile, 123,000 barrel-per-day line – has seen its production plummet, from 118,900 b/d in January to a mere 2,815 b/d in June.
In response, the Energy Ministry has moved to restrict press coverage of the beleaguered pipeline, a spokesman said late last week. According to a ministerial ruling, spokesmen for Oxy and state Ecopetrol will no longer be allowed to reveal information on bomb attacks. Energy Minister Ramiro Valencia will be the only person authorized to comment on operating conditions.
The pipeline attacks have undermined Colombia’s economy. Total June exports of $990.5 million were 14% down on a year previously. In the first half, exports of $6.1 billion were 3% lower.
The value of June oil exports plummeted by 41% to $226 million. The Cano Limon bombings have contributed to a slowing down of the economy, with the government cutting this year’s growth forecast to 2.4% from 3.8%.
There has also been bad news upstream, with Oxy suspending operations at its Gibraltar-1 exploration well – an important first test of prospects in the Siriri block – after results came in dry. Analysts are now watching to see if the firm proceeds with a planned second well or abandons the tract completely (OD Jul.31,p2).
The Gibraltar-1 move put an end to $60 million of investment by the company. Insiders said that Oxy had considered halting work at the well back in December last year, but continued to drill under pressure from the Colombian government.
Removing the equipment from the well will cost Oxy an additional $2.5 million.
For now at least, work on a second exploration well in the block, A1, is due to continue as planned. Ecopetrol said this prospect could contain up to 900 million bbl of oil, although more conservative analysts put the figure at 300 million-500 million bbl. But analysts wonder if the poor results at Gibraltar may prompt a rethink.
Early estimates of Gibraltar’s potential reserves had run as high as 1.4 billion bbl, with conservative figures still putting the level at 800 million bbl or more. In reality, after drilling to a depth of 12,000 feet, Oxy detected only isolated traces of gas and water. Company sources said that “possibly” more seismic work needs to be done before exploration resumes.
Oxy started drilling at Siriri started last November.
Siriri is a remnant of the Samore block, which was negotiated in 1991 between state Ecopetrol and Oxy under a tough production contract based on sliding royalties. Renegotiation of the terms began in 1998. Under a final agreement signed in March 2000, Oxy decided to explore only 25% of the original area, with the new tract dubbed Siriri. In turn, Ecopetrol gave Oxy far better terms, including a flat royalty fee.
Oxy’s drilling of Gibraltar-1 was held up by regulatory issues and protests from Colombia’s U’wa indigenous group, which contended that the work was taking place in sacred ancestral grounds. The U’wa at one point threatened to commit mass suicide if the drilling went ahead. This provoked an international outcry and led to several demonstrations last year.
Oxy maintains that its decision to pull out of Siriri was in no way connected to the bombings at the Cano Limon-Covenas pipeline.
“Our decision to stop drilling is due strictly to technical and geological results. We don’t establish any relation with the situation we’ve been through with the Cano Limon pipeline,” a top Oxy official said. “We’re not giving back the block,” he added.
