VZCZCXYZ0001
RR RUEHWEB

DE RUEHBO #4452/01 3521511
ZNR UUUUU ZZH
R 171511Z DEC 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 6132
INFO RUEHBR/AMEMBASSY BRASILIA 8561
RUEHPE/AMEMBASSY LIMA 6833
RUEHLP/AMEMBASSY LA PAZ DEC CARACAS 1438
RUEHQT/AMEMBASSY QUITO 7535
RUEHZP/AMEMBASSY PANAMA 2794
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS BOGOTA 004452 
 
SIPDIS 
SENSITIVE 
 
WHA/EPSC FOR FCORNEILLE; EEB/ESC FOR MMCMANUS; DOE FOR 
LEINSTEIN 
 
E.O. 12958: N/A 
TAGS: ENRG ECON SENV EPET PGOV CO
SUBJECT: COLOMBIA ENERGY UPDATE: MORE BLOCS, GAS PROSPECTS, 
AND BIOFUELS 
 
REF: BOGOTA 4088 
 
¶1. (SBU) SUMMARY. Colombia's energy sector continues its 
solid expansion in spite of the recent decline in oil and gas 
prices.  The National Hydrocarbons Agency (ANH) has 
adjudicated 100 exploration contracts in 2008--a new 
record--and concluded two successful bloc auctions during the 
year.  On the operational side, oil production has increased 
almost 100,000 barrels per day (bpd) since 2007 and BP 
recently announced promising offshore gas prospects in two 
existing blocs near Cartagena.  Beyond hydrocarbons, Alcol 
Rio Suarez announced the initiation of Colombia's largest 
ethanol plant and the GOC signed an arrangement with Puerto 
Rico to study the feasibility of a submarine cable link for 
Colombia to supply electricity to Puerto Rico. END SUMMARY. 
 
Auction of 43 More Blocs Concludes Record Year 
--------------------------------------------- - 
 
¶2. (SBU) On December 4, ANH completed its second oil and gas 
bloc auction of 2008, receiving bids on 48 heavy oil 
mini-blocs in the eastern Cordillera region (Santander & 
Norte de Santander), Magdalena Department, Putumayo 
Department, and the eastern Llanos region (Meta Department). 
The number of blocs that received bids was one-half of the 
total offered, meeting the GOC target for the round. ANH 
Senior Advisor Jorge Alberto Arias characterized the auction 
to us as a success since many of the blocs received multiple 
bids higher than expected and the unsuccessful blocs 
correlated directly to those with the least amount of 
preliminary data. 
 
¶3. (SBU) Arias said that ANH believes the recent decline in 
world oil prices had negligible impact on the auction, 
asserting that most of the mini-bloc prospects remained 
economically viable at or below current prices. (COMMENT: 
While local petroleum company representatives cite various 
factors such as infrastructure costs, long-term price 
estimates, and anticipated technology advances in determining 
the financial viability of heavy oil prospects in Colombia, 
when pressed most estimate world oil prices above USD 60 a 
barrel are necessary to ensure long-term profitability. 
However, they admit that the break-even point could be lower 
in the future and say locking in exploration rights now 
remains important even during the current price downswing. 
END COMMENT.)  Alejandro Martinez, President of Colombia's 
National Petroleum Association echoed the view telling us 
that Colombia's pro-investment terms, especially vis-a-vis 
the region, should continue to attract considerable 
hydrocarbons investment even in a lower price environment. 
 
¶4. (SBU) The total exploration investment committed to the 48 
adjudicated blocs exceeds USD 300 million and, according to 
ANH Director Armando Zamora, builds on USD 4 billion in total 
hydrocarbon sector investment in 2008.  The latest auction 
follows a successful round in November (reftel) and brings 
total adjudications (exploratory and operational) for 2008 to 
a record 100 contracts.  Colombia has raised oil production 
from an average of 531,000 barrels per day (bpd) in 2007 to 
623,000 in October 2008.  Based upon the increase in 
exploration and investment, Zamora predicts Colombia will 
reach 700,000 bpd in 2009.  ANH Senior Advisor Arias told us 
that the GOC plans to follow up the success of the two 2008 
auctions with a Pacific Basin Round in 2009 and an offshore 
San Andres Basin Round in 2010.  Arias said the exact 
schedule would depend on the completion preliminary seismic 
data rather than world oil prices, asserting that hydrocarbon 
companies take a long-term view in the bidding 
 
decisions--focusing more the available seismic data than 
current oil prices. 
 
BP: Offshore Gas Prospects Promising 
------------------------------------ 
 
¶5. (SBU) BP announced in late November that its recently 
completed seismic data from two blocs one mile offshore of 
Cartagena strongly indicate the presence of commercially 
viable gas deposits.  BP Colombia President Guillermo 
Quintero told us the company plans to begin drilling 
exploratory wells in the second half of 2009 and expressed 
optimism that gas will be found.  Quintero said BP had 
 
invested USD 35 million in mapping and studying its offshore 
blocs and will partner with Petrobras and Colombian 
hydrocarbons parastatal Ecopetrol in developing any gas 
deposits discovered. 
 
Largest Ethanol Plant Launched 
------------------------------ 
 
¶6. (SBU) On December 4, the private investment group Alcol 
Rio Suarez announced the launch of the construction phase of 
new ethanol production facility located in Santander 
Department.  When complete in 2010, the USD 130 million plant 
will rank as Colombia's largest and most multifunctional 
bioenergy facility producing 123 million liters of ethanol 
per year for transportation fuel blending as well as 
co-generate 28 megawatts of electricity from bagasse waste. 
The plant's distillery will also produce fertilizer from the 
vinasse byproduct.  Drawing feedstock from 11,000 hectares of 
sugarcane, the company's president Michael Perdomo told us he 
expects the plant to generate 3,000 direct jobs. 
 
Cooperation with Puerto Rico on Electricity 
------------------------------------------- 
 
¶7. (SBU) On December 11, Foreign Minister Bermudez, in the 
presence of the Acting DCM, signed a statement of cooperation 
with Puerto Rico to study the feasibility of a 680-mile 
submarine cable from Colombia's northern coast in La Guajira 
Department to the island to provide an alternative to current 
oil-fueled electrical generation.  As envisioned, the cable 
would rank as the world's longest, reach a depth of 3000 
meters and cost at least USD 4 billion. 
¶8. (SBU) In addition to the cable, Colombia would have to 
build a designated electrical generation plant in La Guajira 
to supply the power for transmission.  Colombia's main 
electrical transmission company, ISA, and the Medellin Public 
Utilities Company (EPM) have agreed to fund the feasibility 
study while the Inter-American Development Bank has expressed 
interest in potentially supporting the project.  However, the 
GOC will await any further decisions on the project until the 
completion of the study. 
NICHOLS