A new crude pipeline linking Colombia's prolific Llanos basin to a future export terminal on the Pacific coast has been welcomed as a proactive step for the country's expanding oil sector by John Scott, COO of Canadian oil junior Petrominerales (TSX: PMG).
"There are a couple of initiatives, one by Enbridge, one by Ecopetrol, looking at the feasibility of a Pacific export port," Scott said in a presentation to the FirstEnergy Capital Global Energy Conference in Toronto.
"One of the things that Colombia suffers from is not having the infrastructure in place to deal with the success they have had. It's nice to see that they are being proactive for the next stage."
Insufficient transport capacity has been cited by many companies operating in the country as one of the biggest problems the booming oil sector faces.
Production has nearly doubled since 2006, and industry watchers complain that investments in infrastructure have not kept pace with the increased transport demand. They also warn that further growth is likely to be inhibited if new capacity is not brought online at regular intervals.
Scott identified the Pacific pipeline project as particularly important in the development of Colombia's heavy oil resources, which many of the larger companies operating in the country, including Petrominerales, are currently focusing on.
Under proposals recently outlined by Canadian engineering firm Enbridge (NYSE: ENB), the pipeline with potential capacity of up to 400,000b/d could be operational by end-2016.
Financing for the project is likely to be one of the major obstacles to construction, with costs expected to run into the billions of US dollars. Speculation has suggested that Chinese companies and financial institutions are interested in supporting the initiative, in order to reduce the costs and time periods for importing Colombian crude.
Reports have also indicated that the scheme could be tied into a binational pipeline linking the oil industries of Colombia and Venezuela, currently being studied by the former country's NOC Ecopetrol (NYSE: EC), and during his presentation Scott endorsed both ideas as feasible.
"I think on paper it makes a lot of sense. China wants to capture resources, and that kind of deal that ties up Colombia and Venezuela would be very interesting for them. If the Chinese could come in and do something like that, I think it would be great."
Currently around 20% of Colombian and between 10% and 15% of Venezuelan oil exports go to China. Officials in Caracas have outlined plans to export up to 1Mb/d to the Asian country by 2015.
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(Originally published May 17, 2012, by Business News Americas.)