CAPITAL: Bogota

MONETARY UNIT: Peso

REFINING CAPACITY: 248,850 b/cd

OIL PRODUCTION: 635,000 b/d

OIL RESERVES: 2.8 billion bbl

GAS RESERVES: 14.2 tcf

Colombia took steps in 1997 aimed at reversing a large decline in its upstream operations.

Ecopetrol Pres. Antonio Urdinola said Ecopetrol would sweeten contract terms to spread operations into more basins. Other goals were to stop sabotage and other attacks on crude oil pipelines and snag investment for a new refinery to end the country`s long dependence on imported products.

Urdinola, who was appointed to the credit ministry late in the year, said new contract models were needed for areas of high-risk terrain, minor fields in proven areas, and zones where gas may be present. He admitted that sharply lower exploration could make Colombia an oil importer.

The Ecopetrol chief said the association contract used the past 23 years leaves out vast stretches of Colombia`s 439,000 sq miles.

Guerrilla activity caused some of the exploration slowdown, Urdinola said, including near-paralysis of BP`s exploration activities in the Piedemonte block.

Operators drilled only 22 wildcats and shot 2,200 km of seismic in 1996, compared with 67 holes and 9,600 km in 1990.

Output climbed to about 830,000 b/d in late 1997 from 600,000 b/d early in the year as large new fields came on stream. Without new discoveries, it will peak at 1 million b/d in 2000, and exports would cease by 2006. Export of about 500,000 b/d of light, sweet crude-75% of which goes to the U.S.-had been a mainstay of Colombia`s economy.

Production from Cusiana and Cupiagua fields in the Llanos basin reached a record level of more than 300,000 b/d late in the year, but Ecopetrol conceded that the fields would not reach the country`s 500,000 b/d production target by yearend. The reasons were attacks on workers, work stoppages, and pipeline bombings.

Upstream developments

Colombia was gradually making changes in its fiscal systems. The new formula is similar to one Venezuela used to develop its smaller and marginal fields. It allows longer E&P periods and less participation by Ecopetrol but does not change royalties or the tax rate, about 82%.

The new terms became available during 1997 to companies developing smaller fields on existing concessions. The terms were to apply to new acreage offered during 1998.

Exploration had focused on only four of Colombia`s 18 sedimentary basins, and only three of the country`s largest fields account for 70% of total production.

The Llanos basin dominated Colombian upstream activity in 1997 as it had for several years. Occidental Petroleum Corp.`s Cano Limon field produced roughly 800 million bbl of oil between startup in 1985 in 1997 but had been plagued by violence. Cano Limon production averaged 171,000 b/d in mid-1997.

Production from the Cusiana/Cupiagua oil field complex was expected to reach 500,000 b/d in 1998 after completion of two oil production units.

Processing activity

The government said it would look for ways to help an investor build a 150,000 b/d refinery that would help Colombia stem imports of gasoline and other products.

It said it would avoid subsidies but could sign a long term oil supply contract, and it said the refinery owner could sell domestically or export products.

Ecopetrol has large refineries at Barrancabermeja and Cartagena and small plants at Apiay, Orito, and Tibu, with combined crude capacity near 250,000 b/d.

Transportation

Colombia started up in July the $2.2 billion, 800 km Oleoducto Central SA (Ocensa) pipeline from the Cusiana/Cupiagua field complex over the Andes Mountains to Covenas on the Caribbean. The 30 and 36-in. Ocensa and an existing pipeline are designed to handle 500,000 b/d from the two fields.

GAS began flowing in late August through the 214 mile, 20-in. TransGas de Occidente SA gas pipeline between Mariquita-northwest of Bogota-and Cali. The $320 million project also has 267 miles of laterals.

Colombia`s government awarded NorAm Energy Corp., Houston, and partners the right to build and operate natural gas distribution systems in four concessions in the states of Valle del Cauca, Quindio, Risaralda, and Caldas, west and southwest of Bogota. NorAm became part of Houston Industries Corp. during the year.