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Questions arise.....



Bloomberg) -- The collapse in crude oil prices is derailing Colombia’s hopes of developing shale deposits as a way of countering stagnating conventional oil reserves, according to two people with knowledge of the matter.
Global drillers including Exxon Mobil Corp. are deferring shale exploration plans as crude’s 48 percent drop in the past six months exacerbates concerns over gaps in rules covering hydraulic fracturing in Colombia, said the people, who asked not to be identified because the matter isn’t public.
Exxon doesn’t give details on specific exploration programs, it said in an e-mailed response to questions.
The government made shale and offshore exploration a priority amid a failure to make significant discoveries of conventional oil in recent years. Development of new deposits has failed to keep pace with production, with reserve life -- a measure of how much oil is left based on current production -- shrinking to 6.6 years at the end of 2013, from 6.9 years a year earlier.
Colombian drillers including Ecopetrol SA and Pacific Rubiales Energy Corp. have lowered exploration spending this year as they focus limited resources on production. Ecopetrol’s budget for so-called unconventional reserves is $40 million this year, compared with $240 million in 2014, the Bogota-based company said in an e-mailed response to questions.
Fracking Rules
Royal Dutch Shell Plc and ConocoPhillips have also deferred shale exploration spending in Colombia, one of the people said. Shell didn’t reply to e-mails and voice messages seeking comment. Houston-based ConocoPhillips, a non-operating partner in the Santa Isabel project in Colombia’s Middle Magdalena basin, declined to comment in an e-mailed response.
Oil tumbled to the lowest in six years last month as OPEC lets rival producers deal with a global surplus. Drillers cut the number of rigs in service in the U.S. to 1,140 by Feb. 6, the lowest since December 2011, Baker Hughes Inc. data show.
While Colombia published guidelines last year for exploration using fracking, uncertainty over production remains, said the people. Out of 18 unconventional blocks that were offered in July as part of Colombia’s 2014 oil round, only one received bids.
“The lack of regulatory clarity and community fears over fracking are key issues,” Wood Mackenzie Ltd. Vice-President of Upstream Consulting Sebastian Borgarello said in an interview Feb. 5. “Since Exxon, Shell, Conoco are cutting budgets, it’s likely that Colombia spending will fall. Companies in general are very disillusioned with the country.”
To contact the reporter on this story: Andrew Willis in Bogota at awillis21@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Carlos Caminada