BOGOTA, COLOMBIA — Until recently in a free fall because of terrorist attacks that scared off wildcat drillers, Colombia's oil production is staging a surprisingly robust rebound, boosted in no small part by the arrival of oil industry executives and engineers banished by Venezuelan President Hugo Chavez.
Increased production in Colombia, a close U.S. ally, is important for U.S. consumers because it advances the goal of reducing the country's reliance on oil imports from unstable, unreliable or unfriendly governments.
At a public forum last month, Mining and Energy Minister Hernan Martinez said Colombian crude output would reach an average 700,000 barrels a day by December, cementing the nation's position as Latin America's fourth-largest producer after Mexico, Venezuela and Brazil. Colombia's oil production for all of 2009 is estimated to average 645,000 daily barrels, up 10% from average daily output of 589,000 in 2008.
Recent statistics from the U.S. Energy Department show that Colombia is already a significant supplier to the United States. In May, it exported an average of 243,000 barrels of crude daily, making it the 13th-largest shipper of oil to the U.S.
"Colombia is ideally placed geographically to become an important exporter," said Fred Kozak, an energy analyst at Canaccord Capital Corp., a Calgary, Canada, investment firm.
Kozak and other observers expect production and exports to climb in coming months. The country is benefiting from an influx of investment attracted by its improved security. Oil pipeline attacks by leftist rebels, once the bane of the industry, totaled 32 last year, down from 261 in 2001.
Favorable terms and a low government "take," or share of oil profits being claimed by the government of President Alvaro Uribe, also are luring investors. Exploratory oil wells drilled in Colombia totaled 98 last year, up from only 12 wildcat wells in 1999, said Alejandro Martinez, president of the Colombian Petroleum Assn., a trade group.
The expertise of scores of former employees of Petroleos de Venezuela, known as PDVSA, is providing added energy to production efforts. The majority arrived here after Chavez in 2003 fired 20,000 oil company employees who participated in a strike in opposition to his policies.
Colombian production hit a high point in 1999 at 816,000 barrels a day after the discovery of two large oil fields, Cano Limon and Cusiana. Output declined steadily over the next decade, dropping to 526,000 barrels a day in 2005.
One discouraging aspect for investors about Colombian oil exploration is that no big new oil fields have been discovered after three to four years of intensive drilling. Exxon Mobil Corp., Petrobras and other partners spent $135 million on a single deep-water well off Colombia's Caribbean coast in 2007 and came up dry.
But unlike Mexico and Venezuela, where oil output is skidding, Colombia's is on the rise after years of decline, thanks mainly to better recovery of oil at existing fields. For all of 2009, oil output will average 645,000 barrels a day, up 10% from the year before, Martinez said.
National Hydrocarbons Agency Director Armando Zamora said Colombia's reserves rose 32% to 1.66 billion barrels of crude and equivalents in the year that ended in January.
The most promising source of new production is the Rubiales oil field in Meta state in Colombia's eastern jungle plains. The field has long existed, but rebel activity precluded its exploitation. Production there could double to 150,000 barrels a day over the next nine months, government officials say. The field is controlled by Pacific Rubiales Energy Corp., whose shares are traded on the Toronto Stock Exchange. Its chief executive is Ronald Pantin, a former Petroleos de Venezuela executive.
Another prominent Venezuelan player now in Colombia is Alange Energy Corp., which is headed by Luis Giusti, the former president of Petroleos de Venezuela. From 1994 to 1999, Giusti led PDVSA's opening up to foreign investment and the exploitation of Venezuela's vast heavy oil reserves in the so-called Orinoco Belt.
Giusti raised $190 million in private funds for his Colombian venture before taking his company public in June.
Colombia is only part of the PDVSA diaspora stretching from the Canadian tar sands to Houston to Mexico City and Riyadh, Saudi Arabia. And foreign oil operations are the beneficiaries. Many top managers and scientists in PDVSA's research and development unit moved to Canada after the 2003 strike and are now involved in the tar sands project.