Shell signs Colombia offshore E&P contracts

Colombia on Monday awarded two offshore exploration and production contracts to Royal Dutch Shell as part of the Andean country's push to kick start drilling in the Caribbean Sea.

Shell pledged investments of US$100mn during the first phase of exploration on the COL 3 and GUA OFF 3 blocks, covering around 880,000ha, national hydrocarbons agency ANH said in a statement.

"The signing of these contracts revalidates the confidence of oil investors in exploration of our offshore resources in the Caribbean," ANH president Luis Miguel Morelli said in a statement.

Shell Colombia president Ana María Duque said total investment in Shell's newly acquired areas could reach US$650mn.

"[This is] a big step on many fronts," Duque said. "We will increase awareness of the availability of offshore resources, expand the deepwater exploration boundary and have an opportunity to continuing to strengthen relationships with communities."

The minimum exploration program (PEM) for COL 3 includes the reprocessing of almost 1,000km2 of seismic data and the drilling of at least one well.

For GUA OFF 3 there will be a three-stage PEM comprising the acquisition of 2,461km2 of 3D seismic data plus sampling and reprocessing activities.

The announcement follows the approval of new guidelines designed to make blocks more attractive to investors.

The changes, announced in early February, include an option for companies to extend contract periods by increasing payments to the state by 5%. In addition, disputes between companies and the government will be resolved by arbitration.

The overhaul paves the way for offshore technical evaluation contracts involving Petrobras, Anadarko, Shell, Repsol, ExxonMobil and Ecopetrol to be converted into E&P licenses.

Petrobras and Ecopetrol were the first companies to benefit, signing a contract late last month that foresees the drilling of two exploration wells on the Tayrona block.

Colombia's offshore drive coincides with efforts to ramp up investment in mature basins through a permanent offer process.

ANH last week launched bidding for 18 onshore and two offshore blocks as part of the process, providing companies with their first chance to bid for drilling rights in the Andean country since 2014. Investment in the blocks is expected to reach US$600mn.