ConocoPhillips’ Colombia fracking plans suffer setback

13 November 2018, Week 45, Issue 432

Colombia’s National Authority of Environmental Licences (ANLA) has shelved a permit sought by ConocoPhillips to begin hydraulic fracturing tests in the shale-rich Middle Magdalena Valley.

The US-based producer had sent ANLA environmental impact assessments (EIAs) earlier this year for the Ape Piranga and Ape Plata unconventional pilot projects at its VMM-3 and VMM-2 concessions in northern Cesar department.

ConocoPhillips owns an 80% interest in the two blocks, with Canadian producer Canacol holding the remainder.

But ANLA said the EIAs fell short of its regulatory requirements in several areas, including the management and disposal of flowback water produced during fracking and the use of hazardous substances.

“The EIA and additional information supplied by the company … is insufficient to carry out an adequate evaluation,” ANLA said in a decree.

ConocoPhillips said it had filed an appeal with Anla regarding its decision on VMM-2, and was in the process of appealing the VMM-3 ruling.

“We are still committed to working with the government and local communities to obtain the environmental license and progress our exploration plans,” the company told NewsBase Intelligence (NBI).

Fracking for unconventional oil and gas is currently not permitted in Colombia, although President Ivan Duque, who took office in August, supports the technique as a way to tackle the country’s dwindling reserves.

The Colombian Petroleum Association (ACP) said in a report this month that Colombia could hold up to 9 billion barrels of unconventional reserves, or five times its current proven conventional reserves of 1.8 billion barrels.

The report also claimed that the development of unconventional crude could generate around US$500 million per project per year in taxes, economic rights, shareholder dividends and royalties.

“Oil reserves from conventional deposits are running out,” ACP president Francisco Lloreda said in a statement. “This situation does not just threaten Colombia’s energy self-sufficiency, but also aggravates the macroeconomic problem.”

Advocates of fracking in Colombia, however, face strong opposition from a powerful environmental lobby that could hinder Duque’s efforts to push the required legislation through Congress. Producers are also likely to face a tangle of red tape before unconventional projects get the green light.

Fitch Solutions’ senior oil and gas analyst, Mara Roberts, pointed to ConocoPhillips’ efforts to tap Colombia’s Middle Magdalena shale since well before the oil price decline of 2014, with no activity to date.

“The decision by ANLA cements our downbeat view [on Colombia’s unconventional sector],” Roberts told NBI. “This rejection was backed by strong support at the environmental and grassroots level, suggesting it will be very difficult for the agency to reverse course in the near term.”

Edited by

Anna Kachkova

Editor

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