Colombia beckons as Reliance set to acquire two blocks

Vol 11, PW 13 (01 Nov 07) People & Policy

Reliance Industries will soon have its first presence in Latin America’s exploration and production business when it signs contracts for two exploration blocks in Colombia.

PETROWATCH learns both blocks lie in the â€کfrontier’ Borojo Basin in the deep waters offshore Colombia and were awarded to Reliance by the country’s upstream agency Agencia Nacional de Hidrocarburos in September. Exploration and production contracts are yet to be signed.

No exploratory wells have yet been drilled in the Borojo Basin. Each of Reliance’s blocks (Borojo North and Borojo South) measure around 4000-sq km.

Reliance won them after submitting an attractive work programme. In Phase-I, lasting 18 months, Reliance must shoot 3500-km 2D and carry out a â€کmulti-beam survey’, together costing around $15m.

Based on interpretation of Phase-I results, Reliance will decide about Phase-II, where it could spend up to $50m on a combination of 3D and exploration wells. “Reliance will be looking at both oil and gas in these blocks,â€‌ says an industry source.

“The Borojo Basin is a new area but it has some plays which are producing.â€‌ Reliance’s interest in the Borojo Basin follows an 8100-km 2D survey shot in November 2005 over a 16,000-sq km area in a â€کmulti-client’ assignment by Norwegian seismic service provider Wavefield Inseis.

Reliance bought the data in March 2006 soon after it became available. After vetting in-house, Reliance secured a second opinion from energy consultancy RSM Resources.

Despite being sole bidder for both blocks, it decided to go ahead. Under Colombian law Reliance must pay royalty to the government based on production if it is lucky and strikes oil or gas.

Royalty is 2% for production up to 5000 b/d, rising to 3% for production up to 10,000 b/d. If production crosses 25,000 b/d, royalty is 8%, which is the maximum.

“Colombia has one of the best fiscal regimes for E&P operators,â€‌ says a source. “All imports for E&P operations are exempt from customs duties.