The Colombian government has yet to officially halt two fracking pilots being pursued by state-owned Ecopetrol in partnership with Irving, Texas-based Exxon Mobil, but the writing is on the wall. Despite the fracking-related headwinds, Ecopetrol continues to eye production growth from its existing operations.
Two fracking pilots, Kale and Platero, remain on President Gustavo Petro’s radar, who is openly against the use of the hydraulic fracturing technique despite its potential to tremendously boost the South American country’s dwindling oil and gas reserves.
“What we've said as a company is at the end of the day the government, and in particular Congress, takes the decision formally that there won't be fracking in Colombia, we won't do fracking in Colombia,” Ecopetrol’s CEO Felipe Bayon said Nov. 9 during the company’s third quarter of 2022 webcast with analysts, responding to questions about reports in local papers.
Ecopetrol has formally asked Colombia's National Hydrocarbon Agency (ANH), the country’s oil regulator, for a 90-day suspension of the contracts the company has as operator, Bayon said.
In regards to the environmental license for the Kale project, the executive said discussions were in progress with Exxon Mobil about commercial agreements with Ecopetrol and potentially a return of ownership of the occupied areas related to the Kale and Platero projects.
“I would say that we will, as Ecopetrol, remain with the ownership of the acreage… long-term, we'll see where that goes,” Bayon said.
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Colombia continues to flirt with energy security issues amid oil and gas reserves that are separately only enough to last just around eight years based on current production levels. Efforts by Ecopetrol, the country’s largest producer, to boost reserves and production could help Colombia strengthen its energy security and reduce its dependency on costly imports. Fracking and offshore exploration offer Colombia the best and largest potential to significantly extend the useful life of the country’s hydrocarbons.
Ecopetrol reported net income of 9.51 trillion Colombian pesos (around $2 billion) in the third quarter of 2022 and EBITDA of around $4.4 billion with a margin of 48.7%. The financial results were added by rising production and robust commodity prices, Bayon said.
Rising production profile in 2023
Bogota-based Ecopetrol expects its equivalent production to rise between 2%-3% in 2023 due to improvements in Colombia and in the U.S. Permian Basin related to a joint venture with Occidental Petroleum.
Average production was 720,000 boe/d in the third quarter of 2022, while it averaged 706,000 boe/d in the nine-month period from January-September, Bayon said during the webcast, adding the production level in the quarter was the highest achieved since the first quarter of 2022 prior to the start of the COVID-19 pandemic.
Average production is now near the high end of the company’s 2022 target, Bayon said, primarily due to “incremental production from our domestic and international fields, the reestablishment of social order, contribution of tests in exploratory fields, high demand for gas and LPG sales compared to the second quarter of 2022, and recovery of production after scheduled maintenance in Cupiagua and Apiay in June and July, respectively.”
Looking forward, Ecopetrol’s production is expected to come in between 720,000 boe/d-725,000 boe/d in 2023, compared to the 700,000 boe/d-705,000 boe/d range initially expected in 2022, the company’s COO Alberto Consuegra said during the webcast.
“Mostly if you look at what are the sources of the upside, it will be strong production coming from our mature fields – Rubiales, Chichimene, Akacias – new production coming from Cano Sur, and then also the additional production that we are seeing coming from Permian,” Consuegra said.
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Permian JV with Oxy continues to grow
Ecopetrol’s operations in the Permian Basin continue to prove positive as the company continues to learn about shale in a partnership with Oxy.
Joint operations this year in the Permian Basin have been supported by four drilling rigs and two completion crews. Average production was 43,700 boe/d (net to Ecopetrol before royalties) in the third quarter of 2022, up 79% sequential compared to second-quarter 2022 and up 62% compared to the same quarter last year, Bayon said. Ecopetrol’s production in the Permian reached a record high of 50,200 boe/d in September.
Ecopetrol continues to move forward its zero routine flaring initiative and use of fugitive emissions monitoring systems across its Permian facilities. Close to 10.8 MMbbl of water was recycled between January-September compared to 8.3 MMbbl recycled during all of 2021, Bayon said.
Offshore exploration
Off Colombia’s coast, Ecopetrol has confirmed gas in two exploration wells this year: the ultra-deepwater Gorgon-2 well with Shell and the Uchuva-1 well with Petrobras.
Outcomes to flow from the wells will allow Ecopetrol to proceed with the evaluation of the findings which, if developed, would increase Colombia's gas reserves, the Ecopetrol executives said.
Currently, the Ecopetrol Group has a robust and competitive exploration portfolio that drives the country's sovereignty, Consuegra said
Opportunities in the gas space offer estimated potential of 17 Tcf of gas identified in numerous discoveries under evaluation, the COO added.