Potential Resources of Unconventional

Hydrocarbons in Colombia

ANH Unconventional Hydrocarbons Workshop

Bogota, June 8, 2011

Rodolfo Guzmán

Director

Arthur D. Little, Inc.

Houston

guzman.r@adlittle.com

2

Colombia possesses extensive unconventional energy reserves; however, bringing

them to market poses numerous challenges

Colombia Resource Base Development Challenges

Types of unconventional resources:

– Coal bed methane (CBM)

– Shale Gas

– Tar sands

– Oil shale

– Tight gas

– Gas hydrates

Significant technology needs

Higher capital requirements

Longer development times

Higher production costs

Reservoir management complexities

Gathering, transportation and

marketing challenges

Environmental challenges

Development plans and coordination

with transportation infrastructure

Unconventional Resources Overview

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Characteristics that Determine Gas in

Place

Characteristics that Determine Economic

Gas Deliverability

Gas Content

– Coal Rank

– Composition of Coal

– Burial History (Maturation Process) Degassed

and reburied

Total Coal in Place

– Areal extent of coal in the area

– Net Coal Seam Thickness

Storage Capacity (isotherm evaluation)

– Saturation

– Indicates recoverable gas

Thickness of coal seams

Permeability

– Composition of coal

Spacing of coal seams

Depth of coal seams

Hydrology

Depositional Environment

Saturation

Geologic Structure

Reservoir Pressure (under pressure or over

pressure)

Source: Arthur D. Little analysis

The most important parameters in evaluating a CBM prospect are the total gas-in-place

and the economic gas deliverability of the reservoir

Coal Bed Methane

4

Colombia Coal Deposits

Source: Ingeominas, ADL Analysis

CBM in Colombia

Drummond’s La Loma development in Cesar is

the only ongoing CBM project in Colombia.

Drummond’s also has an association contract

for a CBM development in Rio Rancheria

The Cundinamarca and Boyacá regions also

show interesting CBM potential, but no licenses

for CBM have been awarded yet in these areas.

Key CBM resources in Colombia are near

existing gas pipeline infrastructure, but capacity

expansions will be required for significant

increases in gas supply.

Guajira

César

Boyacá

Cundinamarca

CBM total potential estimates in Colombia range from 11 to 35 TCF, although only a

portion of these reserves will be economically recoverable

Coal Bed Methane

5

Colombia has significant coal reserves that have a coal rank suitable for CBM

exploitation

Region

Mineable

Coal in

Place

(Gmt)

Potential

Total Gas

in Place

(TCF)

Coal Rank

Anthracite

Low

Volatile

Bitum

Medium

Volatile

Bitum

High

volatile

A Bitum

High

volatile B

Bitum

High

volatile C

Bitum

Sub

Bitu

m A

Sub

Bitu

m B

Sub

Bitu

m C

Lignite

Cesar 6.6 2.3 – 6.3

Guajira 4.5 2.5 - 10

Boyacá 1.7 2.1 - 5

Cundinamarca 1.5 2 - 5

Valle del

Cauca0.2 0.1 – 6.2

Norte De

Santander0.8 0.9 – 1.2

Cordoba 0.7 0.4 – 0.5

Antioquia 0.5 0.3 – 0.4

Santander 0.8 0.5 - 0.7

Total

Minieable Coal

potential

17.3 11.1 – 35.3

Colombian Basins

Mineable coal in place no deeper than 300 m

Coal Bed Methane

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Colombia gas

shale deposits

Shale gas deposit

Mid Magdalena

Eastern Cordillera

Cesar Rancheria

Source: Robertson’s Research Llanos and Middle Magdalena Basins Geochemical Study; Ecopetrol maps

Gas shale potential in Colombia has been estimated at approximately 30 Tcf of

recoverable reserves

Gas Shale

Colombia gas shale potential

Additional potential of similar magnitude to Mid-Magdalena may be present

in the Eastern Cordillera/Bogota basin, but no geochemical studies are

currently available to confirm this hypothesis

Basin

Area

(sq km)1

Net pay

(meters)2

Gas in

place (Tcf)3

Recoverable

reserves (Tcf)4

Mid Magdalena 7,500 100 289.5 29.0

Eastern

Cordillera 500 100 19.3 1.9

Cesar

Rancheria 200 100 7.72 0.8

Total Shale

Gas 8,200 316.5 31.7

Notes

1. Mid Magdalena area estimated from Robertson’s Research Llanos and Middle Magdalena Basins

Geochemical Study; Cesar Rancheria area estimated from Ecopetrol maps

2. Colombia field observation and measurements by Industry sources

3. Standard gas content assumed at 100 bcf/sq mile derived from average Barnett Shale formation with

100 meter thickness; 1 sq km = 0.386 sq mile

4. Recoverable rate assumed at 10%

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Preliminary estimates indicate that there is only a modest potential for tight gas in

Colombia (around 1.2 Tcf)

Colombia tight

gas deposits

Source: Ingeominas geological maps, ADL Analysis

Tight gas potential

Mid Magdalena

Tight Gas

Colombia tight gas potential

Additional potential may be present in the Eastern Cordillera /

Middle Magdalena Basins, but no geochemical studies are

currently available to confirm this hypothesis

Region

Area

(sq km)1

Gross pay

(meters)2

Pay Volume Gas in

place

(Tcf)5

(acre-

feet)3 (Tcf)4

Eastern

Cordillera/Mid

Magdalena 4,000 200

648,570,

555 28.3 1.2

Total Tight Gas

Potential 4,000

648,570,

555 28.3 1.2

Notes

1. Outcrop measurement from Ingeominas geological map

2. Colombia field observation and measurements by Industry sources

3. 1 sq km = 247.11 acres; 1 meter = 3.28 feet

4. 1 acre foot = 43,560 cf

5. Gas in place = volume x porosity x (1- water saturation)

Porosity assumed at 6% per on-site Colombia field observation and measurements per Industry sources;

water saturation assumed at 30%

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Colombia Oil shale deposits

Source: Ingeominas geological map, ADL Analysis

Oil shale deposit

Upper Magdalena

Pacific

Oil Shale

Colombia oil shale potential

Organic contents reported for the Cretaceous source sequences in Colombia generally

range on average from roughly 1% to 6-8% TOC

However, individual units have been reported with TOC measurements exceeding 10%,

reaching 15-20% in the older units, in the Aptian-Albian and Coniacian-Turonian sequences

Region

Net area

(sq km)1

Net pay

(meters)2

Density

(kg/m3)3

Oil yield

(gallons /

ton)4

Recoverable

reserves

(Mbbl)5

Upper Magdalena

Media Luna and Ataco

Sinclines 128 30 1,720 25 4,334

Pacifico

Istmina Arch 123 50 1,720 35 9,677

Total Oil Shale 251 14,011

Notes

1. Outcrop measurement from Ingeominas geological map

2. Colombia field observation and measurements by Industry sources

3. Density derived from Jordan Oil Shale density; source: USTDA Oil Shale report on Jordan, 2008.

4. Yields adapted from Wyoming and Utah shale yields of 25 gal/ton; Pacifico formation contains higher organic

content and lower

5. Recoverable reserves = volume x density x yield; 1 ton = 907.2 kg, 1 bbl = 42 gallons

Organic content for oil shales in Colombia does not appear to compare to that of the

lithologies that are considered prospective in basins around the world; therefore the

country’s potential appears limited at around 14 Gbbl

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Colombia appears to have significant Tar sand potential in the Florencia, San Vicente

and Río Guejar regions, with recoverable oil resources estimated at 40 to 60 Gbbl

Colombia tar sand deposits

Tar sand deposit

Source: Ingeominas geological maps, ADL analysis, on-site Colombia field observation, Heavy Oil and Oil Sands Guidebook and Directory (2008)

Florencia

San Vicente

Río Guejar

Sogamoso

Río Nare

Tar Sands

Colombia tar sands potential

10Task 4 – Regulatory and Political Sector Recommendations

Gas hydrates potential in Colombia is estimated at approximately 400 Tcf gas in place

Colombia gas hydrate deposits Colombia gas hydrate potential

Source: Ecopetrol, ADL Analysis

Gas Hydrates

Basin

Area

(sq km)1

Net pay

(meters)2

Gas content

(m3 natural

gas/ m3

hydrate)3

Gas in

place

(tcf)4

Caribbean 37,500 1 164 217.1

Pacific 37,500 1 164 217.1

Total Gas Hydrate

Potential 75,000 434.2

Notes

1. Rough area estimates from Ecopetrol 2008 Unconventional Resources presentation

2. Net pay assumed at 1 meter, could be much higher

3. USGS

4. Gas in place = Area x net pay x natural gas content

1 cubic meter = 35.3 cubic feet

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The review of international experiences reveals several key success factors for the

development of unconventional hydrocarbons

Key Success Factors

Evidence of sizeable resources is an important prerequisite for attracting

interest into the development of unconventional resources.

Economic and fiscal incentives have been an important catalyst for catapulting

the growth of unconventional resources in different countries.

Exploration and development times for unconventional resources are typically

much longer than for conventional oil and gas. Block extensions also need to

be larger.

Advantageous access to domestic markets can facilitate the growth of

unconventional resources. Availability of infrastructure and promotion of

natural gas utilization can help these developments as illustrated by the CBM

industry in Australia.

Source: Arthur D. Little Analysis, Various

Key Success Factors

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The review of international experiences reveals several key success factors for the

development of unconventional hydrocarbons (continued)

Key Success Factors (continued)

Participation of specialized players is crucial to ensure that experiences

developed elsewhere can quickly be deployed in the country.

Government sponsored R&D funding and support to private research have

played an important role in stimulating the technological developments needed

to bring to market unconventional resources in many developed countries.

Unconventional hydrocarbon developments are associated with significant

environmental challenges. In most cases, serious attention must to be paid to

issues related to:

– Carbon footprint and air quality

– Water management

– Land disturbance and waste management

Source: Arthur D. Little Analysis, Various

Key Success Factors

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Colombian authorities and industry players need to address several issues to ensure

successful development of unconventional hydrocarbons in the country

Potential Barriers to Unconventional Hydrocarbon Development in Colombia

Source: Arthur D. Little Analysis

Structure of Information Base

Co-existance and Overlapping Rights

Block

Size

Project

Economics

Limited

Number

of

Qualified

Companies

Need for additional downstream

developments

Duration of

Exploitation Period

Delimitation of Development

and Evaluation Period

Fears about assignment

of rights being withheld

Perceived discretionality

to authorize extensions

Challenges