Colombia: New pipeline to open
New oil transportation infrastructure, including a pipeline scheduled to open within the next few months, will shore up Colombia’s efforts to meet rising demand for hydrocarbons and capitalise on promising new finds.
Colombia’s energy sector has expanded significantly in recent years, earning it a place among the top 20 oil-producing countries worldwide and accounting for 35% of FDI in 2012, but inadequate transportation facilities may be limiting growth.
The long-awaited Bicentennial pipeline, which is due to begin operating in August, will play a major role in increasing transportation capacity and reducing bottlenecks. Covering 836 km from the fields in the Casanare region to the Cobeñas Port on the Atlantic coast, the pipeline will be capable of carrying between 110,000 barrels per day (bpd) and 150,000 bpd during its first phase.
The new link will provide support for Colombia’s principal facility, the Central pipeline, which was set up following oil finds at the Cusiana and Cupiagua fields in 1994. The older pipeline is operated by Ocensa, a company jointly owned by Colombia’s Ecopetrol, the UK’s BP and France’s Total.
The Central pipeline carried light crude oil up to 2004 but was modified more recently to accommodate a rise in heavy oil exploitation in the area of Castilla. In 2010, the facility was responsible for 58% of all oil leaving the country.
Ocensa’s general manager, Oscar Trujillo, said plans were in place to increase capacity from the current base rate of 575,000 bpd to 610,000 bpd by end-2014 in segment 2 of the pipeline. “We talk about a bottleneck in the transport of hydrocarbons in Colombia because demand exceeds capacity,” he told OBG. “However, the expansion of the Ocensa tube, along with the imminent opening of the Bicentennial pipeline, will contribute to covering the transport needs of heavy and light oil, respectively.”
Nonetheless, with production levels continuing to rise – output passed the 1m-bpd mark at the end of 2012 – and the signing of 50 new contracts at Oil Round 2012, the government’s auction of exploration rights, expectations for further growth are high. Industry players have now turned their attention to the possibility of building a pipeline to the Pacific, particularly in light of an anticipated increase in demand from Asia.
Canadian engineering firm Enbridge recently completed a feasibility study for the proposed pipeline, concluding that it was viable. Enbridge, which previously held a stake in Ocensa, is the leading member of consortium that has been set up under the name Pacific Pipeline (Oleoducto al Pacífico, OAP) to spearhead the project.
OAP plans to obtain the required environmental licences by 2015 and build the pipeline, which would run for 760 km, before 2017. The initiative would require funding of around $5.6bn. However, some industry players have yet to be convinced that a new pipeline to the Pacific is viable at present.
While discussions on the subject continue, Colombia has confirmed that it will transport oil from the Amazonas to the Pacific coast in Ecuador following a deal struck between private sector players based in the two countries. Veltra Colombia will be the first oil company to begin transporting through the Heavy Crude pipeline. The agreement is viewed by some observers as a landmark for regional integration in hydrocarbons, which could pave the way for similar deals between Colombia and Venezuela.
Colombia’s hydrocarbons sector is at a critical juncture in its development. Over the coming months, the country will be able to calculate whether it has enough reserves to maintain and possibly increase its production levels. While oil transportation is expected to remain a key factor in driving the sector forward, new alternatives should also bring important opportunities for collaboration on a regional level.