By Rodrigo Campos
NEW YORK, March 5 (Reuters) - Colombia’s state-run oilcompany Ecopetrol SA is looking to spend $500million in exploring unconventional deposits over the next threeyears, its chief executive said on Tuesday, starting with pilotprograms in the Magdalena Medio region.
"We've applied for some licenses, we will apply for more...roughly 20 wells that will need to be drilled, fracked, cored,lobed, there's lots of activity, so there's quite a bit ofinvestment," Ecopetrol's Chief Executive Felipe Bayon toldReuters in an interview.
The proposed $500 million is part of the $12 billion to $15billion allocated by Ecopetrol to investing between 2019 and2021, said Bayon, adding that these pilot programs would involveparticipation of nearby communities as well as regulators,authorities and unions.
"The advantage of the pilots is it's like having a fish bowlyou know everybody can look into and be comfortable with what'sbeing done."
Some local communities and many environmentalists inColombia are opposed to the controversial use of hydraulicfracturing, known as fracking, technology which breaks rockformations with pressurized liquid.
Its use is credited for booming oil and gas production inthe United States, but environmental activist have blamed it forwater pollution.
A commission of experts last month issued non-bindingrecommendations regarding monitoring of these pilot programs andthe future use of fracking in Colombia.
"It's fundamental that we incorporate the recommendationsfrom the expert commission," Bayon said. "We hope that we candemonstrate through the pilots that this can be done responsiblyand safely and with the use of the highest worldwide standards."
Bayon said this year's budget incorporates an estimatedprice of $65 per barrel of oil, "but all of our investments aretested at $55."
U.S. crude futures have averaged roughly $53.40 sofar this year.
"I can confirm we are reviewing if we (will) do tacticalhedging for specific commercial deals," he said, without givingmore details.
Looking beyond the investment in unconventional deposits,the oil company said it will try to fill the void left byVenezuela as U.S. sanctions on its oil company have triggered ascarcity of heavy crude in the Atlantic basin.
Bayon said about $1 billion will be deployed in projectsincluding six wells around the tight sands and naturallyfractured reservoirs in the Magdalena Medio, five to 12 wellslooking for gas onshore near the Caribbean coast and about sixmore offshore wells.
Ecopetrol will also look to sign more exploration andproduction contracts this year both in Colombia and abroad.
"We're actively looking to continue to strengthen thepartnerships that we have, both inside Colombia andinternationally," Bayon said.
The company closed a deal with Royal Dutch Shelland Chevron Corp last December after winning a block ina September auction as part of a consortium with BP andCNOOC, both for exploration in Brazil.
The company has had to deal with at least a dozen pipelineattacks, usually attributed to leftist guerrillas, so far thisyear. However, Bayon said, they have had no deferral inproduction as they have been able to use alternative routes totake the oil to port.
"We spent between $30 (million) and $40 million repairingthe pipelines last year. That's money that we could haveinvested somewhere else, either in our business or socialdevelopment."(Reporting by Rodrigo Campos, additional reporting by MariannaParraga in Houston and Julia Symmes Cobb and Luis Jaime Acostain Bogota.Editing by Marguerita Choy)
