Stakeholders to boost Barranquilla, Atlántico as an offshore energy hub in Colombia

Recent hydrocarbons discoveries have resulted in a renewed push for exploration in the Colombian Caribbean Region, as government and energy sector stakeholders set their eyes on a series of largely unexplored onshore and offshore blocks. Barranquilla, the capital of the Atlántico department, is well placed to serve as an energy hub for a prospective offshore industry. The city has a variety of assets, and while there are shortcomings to overcome, government authorities and sector stakeholders have made a concerted effort to achieve this goal, preparing to offer the required services.

Exploration Activities

In December 2016 Hocol, a subsidiary of the state-owned oil company Ecopetrol, confirmed a natural gas discovery at Bullerengue Sur-1, an onshore well located close to Sabanalarga, 30 km from Barranquilla. The company’s find is the first of its kind in Atlántico. It is also the third encountered in the past two years in the region, following discoveries at Orca-1 and Kronos-1, two wells that were drilled successfully in the Colombian Caribbean offshore area. Gas was also discovered at Purple Angel-1 and Gorgon-1 in 2017, but has not yet been extracted.

Such hydrocarbons findings are part of a larger group of activities in the Caribbean Colombian set to continue in the future. “Five offshore exploration initiatives are currently under way, while two offshore findings [Orca-1 and Kronos-1] are being appraised for their commercial potential and value,” Johnny Minervini, president at Seven Seas Energy, told OBG. “The results of the appraisals should be available by 2019 at the latest and 2017 at the earliest, giving us a clearer picture of what lies below, especially in terms of commercial exploration and production [E&P] going forward. For 2018, another five exploration operations are expected.”

Ecopetrol is committed to an ambitious exploration campaign in 2017, for a total of $650m in investment – $150m more than in 2015. Additionally, Ecopetrol is set to take on its first offshore operation in 2017. Located 10 km away from the Chuchupa and Ballena gas fields, off the coast of La Guajira department, $75m has been in invested in Molusco, with operations starting in September 2017. Overall, Ecopetrol is said to have planned six offshore exploration operations in the Colombian Caribbean for 2017, including, among others, activities at Purple Angel with Anadarko; Siluro with Repsol; and Brahma with Petrobras, Repsol and Statoil.

Government Drive

The advancement of exploration activities in the Colombian Caribbean seabed over the past couple of years is staggering when compared to the past four decades. “There have been as many offshore exploration operations in 2016 in the Colombian Caribbean as over the past 45 years,” Alberto Vives de la Espriella, regional director at National Business Association of Colombia (Asociación Nacional de Empresarios de Colombia, ANDI), told OBG. This drive is arguably the product of a government push to incentivise exploration in this area. According to a 2012 study conducted by the Universidad Nacional de Colombia, if exploited, Colombian Caribbean hydrocarbons resources could boost the country’s reserves significantly, multiplying oil by six and raising gas threefold. The government has taken a series of initiatives to promote E&P of hydrocarbons reserves in the Colombian Caribbean, particularly offshore. During the last series of tenders organised in 2014, at which time Anadarko presented a record bid of $123m for one block, the government made five offshore blocks available in the Atlántico department. At present, the Colombian Caribbean holds 22 offshore contracts, 13 of which aim at E&P, and nine for technical evaluation, amounting to a total investment of $1.35bn. A mix of 10 national and international firms, including Anadarko, Ecopetrol, Exxon, ONGC, Petrobras, Repsol, Shell and Statoil, among others, manage the blocks.

Other Incentives

In addition to tenders organised in recent years, the government has also acceded to sector demands aimed at the establishment of zonas francas permanentes costa afuera, or permanent offshore free trade areas, so as to help companies weather the costs of undertaking exploration activities in the Colombian Caribbean seabed, some of which entails deep or ultra-deep drilling. In September 2016 the government approved the first three permanent offshore free trade areas, covering 13 blocks in the Colombian Caribbean, which are set to benefit companies working in those blocks, including Anadarko, Ecopetrol, Exxon, Petrobras, Repsol, Shell and Statoil.

Concerted Push

In view of initial findings and considering the increasing rate of investment, expectations are running high about the impact that the development of the offshore industry may have on the region’s economy. Barranquilla itself is working to take advantage of this situation. Together, the Atlántico-Magdalena Section of ANDI, the Chamber of Commerce of Barranquilla, the investment promotion agency, ProBarranquilla, and local and regional governments in Barranquilla and Atlántico, are making a concerted push to position the region’s capital as the best option for the establishment of offshore energy service providers.

The underlying goal is to make Barranquilla the energy hub of the Colombian Caribbean Region. While hydrocarbons production activities in the Colombian Caribbean Region may only start in earnest in four years, offshore service providers need to decide in two years’ time where to set up shop, hence the impetus to identify their needs and attract them in the short term.

Assets

Atlántico’s capital already displays a number of assets. Minervini told OBG, “Barranquilla has good higher learning institutions, good hospitals, a strong industry, cheap property and available land, as well as developed logistics and transport infrastructure.”

Many would also add the existence of a consolidating logistics cluster to this list. More importantly, Barranquilla has a strategic location to offer. Placed in between offshore exploration activities and the Magdalena River, it can provide the perfect connection to onshore exploration activities in Barrancabermeja, as well as between upstream and downstream activities. “Plans to develop the river’s navigability potential undoubtedly stand to play an important role in this aspect”, Vives de la Espriella said (see overview).

While Barranquilla has shortcomings, it is working to tackle them. “Human capital development is a key issue in this area,” Vives de la Espriella told OBG. “Hence, the significance of having inaugurated a geological engineering programme at the Universidad del Norte in 2016.” For infrastructure and logistics, the sector requires shipyards, helipads, helicopters and ports with the capacity to tend to the needs of offshore platforms. While Barranquilla already has such infrastructure, in some cases it may require further development. In the meantime, red tape and a lack of awareness concerning the sector’s dynamics have already proven to be something of an obstacle. To overcome this challenge, “ANDI has supported, in coordination with other institutions, the organisation of conferences aimed at raising awareness about the sector’s opportunities, challenges and needs, such as the hosting of an event in Barranquilla in March 2016 that focused solely on the offshore industry,” Vives de la Espriella told OBG.

Taking Action

Regional, national and local governments are also taking action. Cecilia Arango, secretary for planning for the Atlántico government, told OBG, “At this point in time, we are working on identifying the industry’s needs, so that once a commercial find is confirmed, Barranquilla can provide the necessary services. This includes, for instance, setting up a helipad and helicopter transport services closer to the coast, as existing ones operate out of the airport.” Current estimates indicate that the offshore industry could require up to 250-300 workers on active platforms per shift, implying in turn, a needed increase in accommodation and nourishment services in the capital.

“It is in this context that the regional government signed a cooperation covenant with local authorities in 2017, the purpose of which is to identify, along with national authorities, the projects required for the development of the offshore industry,” Arango added.

Sister Cities

Recognising the value in learning from others’ experiences, in November 2016 Barranquilla signed a sister cities agreement with Aberdeen, the Scottish fishing town that transformed itself into an offshore service centre 45 years ago, attracting more than $33bn in investment. Such agreements are meant to facilitate technological and knowledge exchanges. The Chamber of Commerce of Barranquilla also signed a cooperation agreement with Aberdeen in the margins of the Caribe Biz Forum in September 2016.

Ultimately, the success of these endeavours hinges on the outcome of E&P activities. For efforts currently being undertaken at the local level to further develop Barranquilla as an offshore service provider to bear fruit, some decisions still need to be made at the national level, including the development of energy sector regulation. If successful, the overall impact is expected to be positive and extremely wide ranging, opening up opportunities for investment in a variety of complementary industries, from hotels and restaurants, to real estate and commerce, among many others.