Russia-s Energy Giants to Tap Into Colombian Fields

Russian energy giants LUKoil and Gazprom are jockeying for position to tap into Colombian oil fields, estimated to hold some 3 billion barrels, the UPI news agency reported Thursday.

Russian and Colombian energy officials met earlier this month in Moscow to discuss the possibility of -expanding cooperation- between the Russian firms and Colombia`s state-owned Ecopetrol.

-In discussing the prospects for mutual action in the oil and gas sectors, the parties agreed to discuss expanding cooperation with Russian companies, including between LUKoil, Ecopetrol and the National Hydrocarbon Agency to jointly implement new projects on search and exploration in Colombia,- read a joint statement.

But the deal is far from set in stone. LUKoil and Gazprom are among eight companies = including BP, Chevron and ExxonMobil =-vying for the rights to explore the country-s still untapped potential.

The Russians must still present a proposal that includes everything from developing the oil fields from scratch to building refineries, as well as producing liquefied natural gas. The winner of the contract is scheduled to be announced in July.

Moscow-s interest in Colombia has been renewed, said analysts, by Bogota`s commitment in recent years to cracking down on both leftist rebels and right-wing paramilitaries, both of which were blamed for the decline of the country-s oil sector during the 1990s.

That, and record high prices per barrel, are prompting energy giants worldwide to reconsider the Colombia option.

Compared to the world-s most productive oil nations, Colombia`s output is small, producing some 526,000 barrels per day. Ecopetrol is responsible for about 60 percent of that production. But what also makes Colombia enticing these days is Bogota-s decision to do away with the prohibitively high taxes on foreign firms that during the last decade were set at 50 percent.

-Colombia now has policies that are very business friendly,- Roger Tissot, director for Latin American countries at PFC Energy, told United Press International. -In term of the investment ... the Colombian government is in a hurry to improve production to slow decline in the industry.-

Tissot noted that for decades Colombia was aware of its attractiveness to foreign investors. For years, Colombians knew they had piqued the interest of foreign investors with their own self-sufficiency; the country does not import any oil. And with geologists prognosticating there are plenty more places to drill, Colombia appeared ready to accept the highest bid from any suitable foreign investor.

Two significant fields = the Cano Limon and Cusina = were made during the 1990s. Industry leaders Occidental and BP were given the right to explore them, respectively. But within the next few years, the tariffs on foreign oil investors went up, prompting other investors to look elsewhere. During that time, the leftist rebel group ELN was also waging a terror campaign against big oil, blasting pipelines and attacking refineries.

Although taxes were reduced after President Alvaro Uribe entered office in 2002, the new president cracked down on rebels and militants, and the country-s oil once again became a hot commodity.

Another choice field near the Venezuelan border is also up for grabs. The Tibu field project would cost an estimated $200 million and is drawing bidders from all over, including neighboring Brazil`s state-run energy company Petrobras. Violence, however, still -remains a significant concern- for would-be investors, noted Tissot.

Last week, rebels bombed the Cano Limon pipeline and halted pumping, part of a recent increase in attacks ahead of presidential elections later this month. Uribe is a strong favorite to win re-election. Despite the increasing violence in recent months, high prices at the pump are what will continue to draw oil companies to Colombia for years to come, Tissot said.

-Knowing that higher prices are likely to be sustained in the middle term ... oil companies are really desperate to look for other options,- he said.