Canacol negotiates gas sales as it triples Colombia output

BOGOTA (Bloomberg) -- Canacol Energy Ltd., a natural gas explorer in Colombia, is negotiating new supply deals as it steps up drilling and expects to more than triple gas production in the Andean country by year-end.

The producer is on track to increase gas output to about 90 MMcfgd in December to meet existing contracts, up from about 25 million now, CEO Charle Gamba said in an interview. The company is in talks to supply a further 25 million daily cubic ft.

“We are currently working on a number of smaller contracts that we hope to bring on stream early next year,” Gamba said in a telephone interview from Bogota Wednesday. “We are hoping that we can produce right to our productive capacity, which will be 120 million cubic feet.”

Canacol has risen 14% in Bogota this year, making it the top performer on Colombia’s Colcap index and one of only two to post a gain. The Andean nation’s two largest oil producers -- state-run Ecopetrol SA and Pacific Exploration and Production Corp. -- are among the worst performers.

Clarinete Find

Canacol plans to add two more wells at its Clarinete discovery by December, further increasing productive capacity by approximately 35 MMcfgd, Gamba said.

Colombian demand for gas is starting to outstrip supply, especially on the Caribbean coast, amid economic growth and fast declining production at aging fields operated by Chevron Corp. in partnership with Ecopetrol.

“It translates into a very strong pricing environment for local gas producers,” Gamba said. “That puts us in a very unique position. Because those fields dominated the supply of gas to the coast for 25 years, nobody has really been exploring around there.”

Gas prices in Colombia are $4 to $8 per million British thermal units at the wellhead, more than double prices in North America, Gamba said.

Mexico Auctions

Canacol has partnered with drilling services company Perfolat de Mexico to participate in Mexican bidding rounds. Officials there have eased several key components of its energy auction to encourage greater interest, in response to the tepid participation for the country’s first private auction earlier this summer.

The slump in oil prices has reduced interest from major global producers and made it a more level playing field for Canacol, which plans to submit a bid for an auction of onshore fields in December, Gamba said.

“I think the subsequent two rounds which involve producing oil and gas fields will draw a lot more attention,” he said. “The potential is very obvious in terms of the resource, but Mexico is a very complicated country. It’s going to take a lot of time to build a viable business there.”