ISABELANA

Colombia

Seven companies bid for 11 oil exploration contracts as the Andean producer seeks to revitalise its oil sector.

Frontera Energy, Geopark, Ecopetrol, Hocol, Parex Resources, Gran Tierra Energy and ONGC Videsh submitted 19 offers, the national hydrocarbons agency said. Ten blocks are onshore and one is offshore.

At least 22 companies were qualified to bid on 20 blocks on offer in the auction. Results of the bidding are expected on July 16.

Reuters

Frontera announces results of bid round

28 Jun 2019
Frontera Energy was awarded the Llanos-99 block following the successful Agencia Nacional de Hidrocarburos (‘ANH’) bid round. Definitive award documentation will be entered into in July 2019.

The Llanos-99 block includes 134,900 acres within the prolific Llanos basin on trend with fields that produce medium to light oil from the C-5 and C-7 zones within the Carbonera formation. The Company preliminarily identified two prospective locations on the block with plans to start the environmental permitting process for the required 3D seismic program as soon as practicable with the goal of an exploration well to be drilled in 2021. Under the terms of the award of the block the Company is committed to undertaking a 61 km2 3D seismic survey and one exploration well.

Richard Herbert, Chief Executive Officer of Frontera commented:

‘We are pleased with the initial results of the ANH bid round and look forward to participating in the ongoing permanent process in Colombia where we expect to see two more bid rounds in 2019. The Llanos-99 block is a typical medium and light oil block in the Llanos basin, which is the core area of Frontera’s portfolio and where we have had a significant amount of exploration success in the past.’

Source: Frontera Energy

GeoPark awarded three Llanos basin blocks

GeoPark announced expansion of its portfolio following the successful ANH bid round in June 2019.

GeoPark was awarded the Llanos 86, Llanos 87 and Llanos 104 blocks in partnership with Hocol (a 100% subsidiary of Ecopetrol) and a right of first refusal for the acquisition of the VIM 22 block.

The acquired blocks represent significant and attractive, low-risk, high potential exploration acreage in the Llanos basin in proximity to GeoPark’s successful Llanos 34 block (GeoPark operated, 45% WI), and surrounded by multiple producing oil and gas fields, as well as existing infrastructure. GeoPark will be the operator with a 50% WI.

The Llanos 87 block is located adjacent to and on trend with the Llanos 34 block. The Llanos 86 and Llanos 104 blocks are contiguous areas (20 kilometers southeast of the Llanos 34 block), on trend with nearby producing oil fields. The three blocks cover an aggregate area of 679,292 acres (2,752 sq km) – eight times the size of the Llanos 34 block.

GeoPark and Hocol preliminarily identified multiple oil prospects and leads, resulting from their proven expertise in the Llanos basin, existing 3D seismic as well as other relevant data. Geoscience evaluation is ongoing and field operations are expected to start in late 2019 or early 2020.

The blocks were awarded to the GeoPark/Hocol consortium as part of the Permanent Process for the Assignment of Areas (“PPAA”) in Bogota, Colombia. Final contracts are expected to be signed in 3Q2019.

The winning bids consisted of commitments to register 550 square km of 3D seismic and to drill six exploration wells during the first exploration phase, with a firm investment commitment of $80-110 million ($40-55 million net to GeoPark) over the next three years, as follows:

As part of the ongoing PPAA bid round, GeoPark has a right of first refusal for the acquisition of a 100% WI in the VIM 22 block (412,172 gross acres) in the Magdalena basin, following the Company’s initial bid on June 4, 2019. Final decision by GeoPark on this block will be July 9, 2019.

James F. Park, CEO of GeoPark, said:

‘Congratulations to our Colombian team for succeeding in acquiring this new high potential big acreage position – located right in our own prime and proven neighborhood. And, we are especially excited about our new venture with Hocol (a 100% subsidiary of Ecopetrol) and the opportunity to prove our ability to perform and build a long term successful partnership.’

Source: GeoPark

Gran Tierra Energy operations update

Gran Tierra Energy, a company focused on oil and gas exploration and production in Colombia and Ecuador, announced an operations update regarding activities and results during second quarter 2019 to date.

Key Highlights

• The expansions of Acordionero’s central processing and water injection facilities, as well as the installation of gas-to-power turbines (‘Acordionero Projects’), are mechanically complete with commissioning expected during July 2019, which represents a significant milestone for the Company and its largest oil producing asset
• Record drilling results achieved in Acordionero: the AC-40 and AC-41 wells were drilled in 9.5 and 7.4 days respectively, each a consecutive record short drilling time for the field
• Received the Global Environmental License for Acordionero on June 12, 2019 from the Autoridad Nacional de Licencias Ambientales, the Colombian environmental regulator; this license is expected to allow accelerated and optimized full field development of Acordionero
• The Company believes the successful drilling and operations activities at both Acordionero and Suroriente to date will support increases in Proved (“1P”) and Probable (“2P”) reserves
• Surpassed over six million person-hours without a lost time incident
• Gran Tierra has preliminarily won two blocks in the recent Agencia Nacional de Hidrocarburos bid round in Colombia; the Company believes these blocks may be highly prospective; as part of the bidding process, other companies can offer more than Gran Tierra’s proposed work commitment until June 26, 2019 in an attempt to win the blocks, but Gran Tierra has a right of first refusal in respect of such offers since the Company’s initial bid was the highest
• Gran Tierra has officially signed contracts for our three exploration blocks in Ecuador; the Company is making progress and plans to drill its first exploration well in Ecuador in late 2019 or early 2020
• New personnel hired to improve operations: a new Vice President of Asset Management and a new Director of Completions both recently joined the Company
• Gran Tierra is addressing temporary operational issues which have impacted production; the Company is taking the necessary steps to get production back on track and believes our oil reserves and values remain intact as these challenges represent deferral of production; the Company does not believe these issues are related to the underlying quality of the assets; further information is provided below:
• From April 1, 2019 to May 23, 2019, Company production averaged 37,700 barrels of oil per day equivalent (“BOEPD”), and was expected to meet our previously published full year 2019 guidance

Starting in late May 2019, production decreased as a result of the following:

1. Acordionero: the Company proactively shut-in two oil producers with high gas-oil ratios (“GOR”); two other oil producers went off-line due to electric submersible pump (“ESP”) failures; total current, temporary impact to production is approximately 4,500 BOEPD
2. Suroriente and PUT-7: local farmers set up blockades in the southern Putumayo region to protest against the Colombian national government; these protests are not directed at the oil industry or Gran Tierra; as a result of these blockades, Gran Tierra had to shut in all production at both of these blocks; total current, temporary impact to production is approximately 4,500 BOEPD

For second quarter to June 17, 2019 Company production averaged approximately 36,200 BOEPD; for the five days up to and including June 17, 2019, the Company’s production was approximately 29,000 BOEPD

As a result of these events, Gran Tierra will revisit its guidance over the coming months and expects to revise its guidance once the impact of the blockades and the startup of the Acordionero Projects can be fully assessed

Gran Tierra is taking the following mitigation actions to address these temporary operational issues with production:

1. Acordionero: the planned full commissioning of the Acordionero Projects during July 2019 is expected to allow a rapid increase in water injection from approximately 16,000 barrels of water injected per day (“bwipd”) to 40,000 bwipd and release three rental facilities which will reduce operating costs; this full implementation of the Acordionero waterflood is forecast to repressure the reservoir over the next few months, which should reduce the field’s GOR, which in turn would allow the Company to increase oil production rates from several wells and to bring back online those wells which were temporarily shut-in; start-up of the 20 megawatt gas-to-power project at the same time is expected to significantly improve power reliability, improve ESP reliability and significantly lower operating costs; all of these activities are expected to restore Acordionero’s production back to levels achieved in first quarter 2019 over the next few months and grow in 2020, despite the recent production decrease
2. Suroriente and PUT-7: Government authorities are addressing farmers’ concerns and expect to restore normal conditions within days; Gran Tierra is working closely with officials to safely resume operations and production on these two blocks as soon as possible; the Company may continue to have short-term interruptions in the area which are difficult to predict; the Company expects to restore Suroriente’s and PUT-7’s oil production back to normal levels once the blockades are resolved

Costayaco: the Company is currently drilling the CYC-39 infill oil well which is expected to be on production in July 2019; in mid-July 2019, the Company expects to spud the first of two horizontal water injectors (one each for the T Sand and the Caballos Formation) to improve ultimate oil recovery; these actions are expected to improve Costayaco’s oil production performance

Ayombero: the Company expects to contract a snubbing unit (equipment capable of working with high pressures) to retrieve parted coiled tubing in both the AY-2 and 3 wells and to continue with completion operations; the AY-1 well was successfully cleaned out and re-perforated across the entire Galembo formation and is expected to be placed on long-term production test; we are encouraged by the three Ayombero wells drilled to date which have confirmed similar lithologies, oil saturations and over-pressure in the Galembo Member of the La Luna Carbonate reservoir, suggesting reservoir and structural continuity; the Company’s estimates of oil in place and prospective resources are unchanged by these short-term issues

Gary Guidry, President and Chief Executive Officer commented:

‘With the receipt of the Acordionero Global Environmental License and the planned commissioning of the Acordionero Projects, as well as the lifting of the blockades in the southern Putumayo, we believe we are capable of restoring our production back up to over 40,000 BOEPD. The timing of this forecasted production increase depends on the water injection response at Acordionero and the impacts of community blockades in the southern Putumayo. We believe the current production decrease is a deferral, not a loss of reserves, and that we are taking the necessary steps to get production back on track. Overall, while the delay in the Acordionero Projects has deferred production in the short term, we are very encouraged by the continuity and quality of the sands in Acordionero and the expected commissioning of these projects in July 2019 is a major milestone. Based on the drilling to date in Acordionero and the commissioning of the Acordionero Projects, we expect to increase the original oil in place and recovery factor which will increase both the 1P and 2P reserves in Acordionero.’

Exploration Update (All Projects 100% WI)

Llanos Basin: Prosperidad-1 Well, El Porton Block

While sufficient oil shows and gas log response warranted testing the lower Gacheta Formation, only formation water was recovered; as a result Gran Tierra plans to abandon this well
This exploration commitment well was part of the Petroamerica acquisition in early 2016 and Gran Tierra was required to drill it in under the terms of the ANH contract
The one positive result is that Prosperidad-1 was successfully drilled to a depth of approximately 17,000 feet, which was the deepest well ever drilled by the Company and demonstrated the technical skills of Gran Tierra’s drilling team.

Putumayo Basin: Pomorroso, Almendrillo and Pecari Wells, PUT-7 Block

All three exploration wells have found producible oil in multiple zones (U Sand, A-Limestone and N Sand), at rates ranging from 100 to 300 BOEPD in each zone
We are encouraged about encountering oil in multiple wells and are determining the optimal completion and stimulation design; a go-forward plan is expected to be determined during July 2019
The Company is working to seek approval to commingle several productive zones within a single wellbore (a production method used at the Costayaco and Moqueta fields) to further improve the ultimate recovery and enhance the economics of the wells
Currently, activity is ceased as a result of the blockades referenced above

Source: Gran Tierra Energy

Parex Resources Andina Norte-1 well test

Parex Resources announced the testing of the Capachos Block Andina Norte-1 well in the Guadalupe Formation.

Capachos (WI Parex 50%, Ecopetrol S.A 50%): Parex, as the operator drilled the Andina Norte-1 exploration well to a total depth of 18,852 feet and encountered oil bearing reservoirs in the Une and Guadalupe formations.

The primary objective, the Guadalupe reservoir was completed following a cement remediation and production testing commenced on June 5, 2019. A total of 9,398 barrels of 40 API oil, 488 barrels of water and 14 million cubic feet (‘MMCF’) of natural gas have been recovered to date.

Over an 81 hour period the average production test rate for the well was 2,785 barrels of oil per day, 4.3 million cubic feet per day (‘MMCFD’) of natural gas under natural flowing conditions with a wellhead pressure of 1,420 psi.

The facility restricted measured rate during the last 12 hours of testing has been 2,892 BOPD and 4.6 MMCFD of gas with a watercut of 2%. Water production from the well is believed to be remaining completion fluids as less than one third of the completion fluid has been recovered to date.

Bottom hole pressure recorders indicate a drawdown of approximately 15% and a pressure buildup and analysis will be conducted at the end of the test. Parex expects to produce the Guadalupe Formation in the Andina Norte-1 well.

The Andina Norte-1 well also evaluated a secondary objective, the Une Formation. The Une was tested over a 63 hour period under natural flowing conditions and recovered a total of 1,631 Barrels of 37 API Oil, 1,173 barrels of water and 3.9 MMCF of natural gas.

Average production during the test was 621 barrels of oil per day, 446 barrels of water per day and 1.5 million cubic feet of gas per day.

Parex believes remediation of the Une Formation would be required to isolate the water production. As the Une Formation was a secondary well objective, this zone was suspended to allow testing of the up-hole Guadalupe Formation. Parex expects that the Une reservoir will be produced later along with the Une reservoir discovered in the Andina field.

field.

The drilling rig will be skidded on the same pad to drill the Andina-3 appraisal well.

Currently the Capachos block gross production is restricted at approx. 5,100 bopd (net 2,550 bopd).

Source: Parex Resources

Amerisur Resources disposal to Occidental

Amerisur Resources entered into a conditional agreement with Occidental Andina to dispose of a 50% interest in the Put-8 exploration licence in the Putumayo region of Colombia, for a cash consideration of US$ 19.1 million.

On 20 March 2019, Amerisur announced that it had exercised a right of first refusal (the ‘ROFR’) to acquire the 50% of Put-8 that it is not already interested in, and the operatorship of Put-8, from Vetra Exploración y Producción Colombia. On 18 March 2019, Amerisur entered into the Agreement with Occidental which is conditional, inter alia, on the approval by the Colombian National Hydrocarbons Agency (the ‘ANH’) of the transfer of a 50% interest from Vetra to Amerisur, pursuant to the ROFR and the subsequent application for and approval of the transfer of a 50% interest in Put-8 from Amerisur to Occidental by the ANH.

The consideration for the Disposal is US$19.1 million in cash, including local taxes, which has been pre-paid by Occidental on the basis that it is refundable if the Disposal does not complete. On completion of the Disposal, taking into account the pre-payment by Occidental and the recovery of local taxes, the net effect of the completion of the ROFR and the Agreement is expected to be broadly neutral to the Company’s unrestricted cash position. Amerisur will retain the operatorship of Put-8 following completion of the Disposal.

Source: Amerisur Resources

Oxy Enters Four Southern Blocks

U.S.-based oil company Occidental Petroleum Corp partnered with Amerisur Resources Plc on four exploration and production blocks in southern Colombia, near the border with Ecuador, the National Hydrocarbons Agency said.

The Tacacho, Terecay, PUT-9 and Mecaya blocks are in the jungle region of Putumayo, one of the provinces with the greatest potential for oil discovery.

Amerisur, which will continue as operator of the blocks, ceded 50% of its participation in the blocks to Occidental, the ANH said.

“These are four very important blocks in Putumayo, a very prospective area of the country that’s developing in leaps and bounds,” ANH President Luis Miguel Morelli said. The extension of the four blocks exceeds 554,000 hectares.

Colombia has proven reserves of almost 2 billion barrels, equivalent to 6.2 years of consumption, with a current average production of 865,000 barrels per day. The South American country is seeking to increase reserves to at least 10 years of consumption by offering areas for exploration, allowing companies to apply to explore in blocks of interest and making contracts more flexible.

Amerisur Resources update on operations

Amerisur Resources, the oil and gas producer and explorer focused on South America, provided an update on operations in Colombia.
Highlights

• Final ANH approvals received for farm-out deal with Occidental
• Successful infill well at Platanillo
• WI Production over 6,800 BOPD
• ANH Approval of Occidental Farm Out Deal

The ANH has granted approval of the farm-out agreement with Occidental announced 23 November 2018. The deal relates to four exploration blocks: Putumayo-9, Terecay, Tacacho and Mecaya in the Putumayo region, southern Colombia. Occidental acquires a 50% interest in each block and in consideration will fund a $93m exploration and appraisal programme between 2019-21. Funding includes 85% of the 1068km 2D seismic equivalent and 100% of the planned four well drilling programme.

Amerisur remains operator of the blocks that cover 1.4m gross acres and hold 448 MMBO mid-case gross prospective resources, based on management estimates.

Platanillo (WI 100%): Production Optimisation

The company completed the Platanillo-26 infill well targeting an undrained area of the Platanillo field. The well reached the target depth of 9,350ft and encountered 46ft net pay in the upper and lower U sands. The well is now onstream and producing around 710 BOPD. Production optimisation on the field continues with a sidetrack well at Platanillo-22.

Production Update: Current Production over 6,800 BOPD

Year-to-date production to the end of May 2019 averaged around 5,300 BOPD. Current group working interest production is now over 6,800 BOPD following the successful infill well at Platanillo and continued stable production from CPO-5. FY19 production guidance is maintained at 5,000 – 6,000 BOPD and does not include any contribution from exploration drilling.

CPO-5 (WI 30%): Sol-1 Exploration Well

Operations on the Sol-1 exploration well continue and results will be announced shortly. After drilling operations are completed at Sol-1 the rig will move to drill the Indico-2 appraisal well.

John Wardle, CEO of Amerisur, said:

‘We are pleased to secure all the approvals associated with the transformational deal with Occidental. Work has started to initiate seismic surveys and drilling on the acreage later this year. Production optimisation at Platanillo continues to deliver with production now over 4,500 BOPD from the field. On completion at Sol-1 the drilling rig on CPO-5 will return to Indico for appraisal drilling that has the potential to increase reserves and production from the field’.

Source: Amerisur Resources

Amerisur Resources Sol-1 well update

Amerisur Resources provided an update on operations .

CPO-5 (WI 30%): Exploration Drilling Update

Logging operations on the Sol-1 exploration well on Block CPO5 (AMER 30%) are complete. The well was drilled to a final depth of 9,986ft. Following initial analysis, 26.5ft net oil pay in the LS3 and 10.5ft net oil pay in the LS1 sands of the Une formation were identified.

Based on logging and MDT samples. Short term testing operations are underway and the company will provide a further update once this is concluded.

After testing operations are completed at Sol-1 the rig will move to drill the Indico-2 appraisal well.

John Wardle, CEO of Amerisur Resources said:

‘We are pleased to report that Sol has encountered potential net oil pay. Although smaller than the oil column encountered by our previous discoveries it demonstrates the potential for further prospectivity across CPO-5.’

Source: Amerisur Resources

Canacol tests gas discovery

Canacol Energy provided the results of the Acordeon-1 exploration well located on its 100% operated VIM 5 block in the Lower Magdalena Valley Basin. Given the magnitude of this new discovery the Corporation is altering its previously announced 2019 drilling program and spud the Ocarina-1 well in order to prove up its reserve potential.

Additionally, Promigas has received all regulatory approvals, including approvals of the two modifications to the Jobo to Majaguas pipeline segment, required to complete the construction of the pipeline expansion.

The Corporation estimates that the 80 million standard cubic feet/day (‘MMscfpd’) of new pipeline capacity will be on stream by mid-July 2019, lifting Canacol’s gas sales to approx. 215 MMscfpd.

Acordeon 1 Tests 33 MMscfpd

The Acordeon-1 exploration well is located approx. 4 kms southeast of the Clarinete gas field on the 100% operated working interest VIM 5 Exploration and Production Contract. Using the Pioneer 53 drilling rig the Acordeon-1 well, spud on May 11, 2019 reached a total depth of 8,500 feet measured depth in 14 days.

The well encountered 420 feet of gross gas pay between 7,646 and 8,066 feet true vertical depth (‘ft TVD’) with average porosity of 18% within the primary Cienaga de Oro (‘CDO’) sandstone reservoir target. The interval between 7,706 and 7,862 ft TVD was production tested at multiple rates for a 42 hour period. This interval flowed at a final rate of 33 MMscfpd at a flowing tubing head pressure of 1476 psi and a choke of 60/64 inch.

The well will be tied into the Jobo production facility via the Pandereta flow line and brought onto permanent production by the end of July 2019.

Corporation Spuds Ocarina 1 Well

The Pioneer 53 drilling rig spudded the Ocarina-1 appraisal well on June 11, 2019 from the same platform that the Acordeon-1 well was drilled from. Ocarina-1 will test the same CDO reservoir encountered at Acordeon-1 in a downhole location situated approx. 1 km to the southeast and at a structural elevation approx. 400 feet up dip of where the CDO reservoir was encountered at Acordeon-1. The Corporation anticipates that the Ocarina-1 well will take approx. 5 weeks to drill, complete, and test.

The Corporation will provide regular updates on drilling results as they become available.

Source: Canacol Energy

Arrow Exploration discovery at Rio Cravo Este

Arrow Exploration announced test results of the Rio Cravo Este-1 (‘RCE-1’) exploration well located on the Tapir Block in the Llanos Basin of Colombia. RCE-1 was spud on April 25 2019 and reached a total depth of 10,000 feet measured depth (‘ft md’) within the Ubaque Formation. As announced on May 15th, the well encountered 103 feet of net oil pay (true vertical depth) with most of the pay indicated on logs within the C7, Gacheta, and Ubaque formations.

The RCE-1 exploration well was perforated and tested over a 12-foot interval (true vertical depth) in the ‘C7 A’Sand. An 11-day clean-up and production test period commenced May 30 at 09:00 hours and was concluded June 9 at 08:00 hours.

Oil production over the test period averaged 613 barrels per day (‘bbl/d’) of 28.3 API oil at a 46.5% water cut over a range of choke sizes. A peak oil rate of 1,172 bbl/d was recorded and the well did not produce any natural gas during the production test.

Jack Scott, Chief Operating Officer, stated:

‘We’re very pleased with our RCE-1 test results. Arrow has now gone two for two on exploration wells since forming the company with our success on Danes-1 late last year and current success on RCE-1. RCE-1 was an earn-in commitment well with an accelerated payback provision which means we’re able to recover $3 million of the cost of the well from 50% of our partner’s working interest barrels. Next steps include carrying out a pressure build-up test and putting the well on continuous production from the C7 Sand.’

Tapir Block Forward Plans

After the drilling and completion of RCE-1, Arrow fulfilled its commitment to earn a 50% working interest in the Tapir Block, which has no further work commitments or land expiries for 20 years.

However, given the amount of net pay encountered in RCE-1 and the mapped extent of the accumulation, testing the Gacheta and Ubaque formations in the RCE-1 well and drilling up to two development locations and a water disposal well are being evaluated.

The water disposal well and one development drilling location are currently licensed. Multiple leads and fault trends have been identified on the Tapir Block with existing 2D seismic data. These will be more clearly defined with the completion of an extensive new 3D seismic survey which Arrow plans to acquire over the next 12 months.

The Company is currently sharing the RCE-1 test results with its reserve evaluator (DeGolyer & MacNaughton of Dallas, TX) for the purpose of procuring an updated reserve report which is anticipated to be completed prior to October 1, 2019.

Arrow does not currently have any reserves booked on the Tapir Block, therefore, any reserves which may be ascribed to the RCE-1 discovery would represent incremental upside to Arrow’s corporate reserves.

Bruce McDonald, President & CEO, commented:

‘We remain focused on our business plan to add production, reduce commitments and protect downside for our shareholders. We’ve now grown corporate production by approx. 100% per share net of dispositions with our success at RCE-1 without compromising our balance sheet. We continue to work diligently towards closing a credit facility and we look forward to updating the market on this item in the near-term.The combination of our recent Brent crude oil hedge and the expected incremental cash flow from RCE-1 puts Arrow in an excellent position to continue our production growth for the balance of this year and into next.’

Source: Arrow Exploration

Cuba

2019 Licensing Round for the Gulf of Mexico

Cuba announced the 2019 Licensing Round for Offshore Blocks in the Cuban Economic Exclusive Zone of Gulf of Mexico on 3rd June in London. CUPET has confirmed that the last stop of the roadshow will take place in Havana on 27th November as part of the Cuba Energy, Oil and Gas Conference 2019.

CUPET made the official announcement for the launch and process of Cuba’s first licensing round on 3rd June 2019 at the Institute of Directors.

CUPET invted Oil Companies, interested in exploration and exploitation of Hydrocarbon activities in the Economic Exclusive Zone (EEZ) of the Cuban sector in the Gulf of Mexico to present offers for one or more blocks, under Production Sharing Agreements (PSA).

Blocks for the first License Round include 24 blocks associated to highest exploratory potential geological scenarios. Classification criteria are based on available information, mapped leads, sea depths and estimated risks.

All existing information and data packages will be available for registered and qualified companies for the license round. The offered area is widely covered by a recent BGP 2D multiclient high resolution seismic. Data packages are available from BGP upon request, as well as the possibility to access Data Rooms in specialized events or online.

The possibility to participate in existing Farm-out projects remains open by direct negotiation with operating companies PDVSA and Sonangol, and with CUPET support. Companies may participate independently or associated in trusts of two or more companies.

The Gulf of Mexico is one of the most prolific and prospective offshore areas in the world. Cuba produces around 60000 BOE/day from the western offshore by drilling extended-reach wells through duplex structures in the Fold and Thrust Belt.

Reservoirs are basically fractured and lixiviated carbonates from Late Jurassic. The seals are lithologically composed by Tertiary shale, while source rocks are Jurassic deep water clayey carbonate facies.

In 2012, three exploration wells were drilled in this area, targets were focused on Cretaceous carbonates and no commercial oil was discovered; however, all wells had oil shows which according to biomarkers were originated in Late Jurassic source rocks. Thus proving the extension of this unit in the offshore.

New 2017 2D BGP multiclient seismic provided valuable information concerning basement depth, and sedimentary thickness. Besides, useful data was obtained as deep as 7-9 sec (~10-12 km) to determine with high accuracy the boundaries between different exploration scenarios and the seismic stratigraphic sketch for regional interpretation, exploratory play types could be re-defined.

In addition, new areas with huge potential for petroleum systems occurrence were determined.

By mapping several leads in a first interpretation stage resources are estimated in more than 10 billion barrels of recoverable oil, with expected qualities of 25-35° API.

• • Interested companies must qualify with the national regulation authority, The National Office of Mineral Resources (ONRM), prior to presenting their formal offer for the Licensing Round
  • Terms and Conditions under provision of the Foreign Investment Law 118 and its implementation norms and resolutions
  • Main features of contract model are typical Production Sharing Agreements for which Contractor assumes all risks, costs and responsibilities of the activity
  • Progressive fiscal system. Main terms are 30 to 35-year contract,
  • No Signature Bonus,
  • Nor Royalties,
  • No taxes or levies of any kind during exploration phase.
  • Up to 70% cost recovery
  • Income tax on profit oil 15%, at the 9th year of the project.
  • No taxes for repatriation of profits

Source: Cupet

CARICOM

Foreign ministers of the Caribbean Community and Cuba voiced their countries willingness to face together the challenges to achieve sustainable development. The commitment was expressed in a Final Declaration issued at the end of the 6th CARICOM-Cuba Ministerial Conference in Georgetown, Guyana. Participating countries highlighted that regional unity remains a fundamental support to the improvement of economic and environmental spheres in their respective efforts to build fairer and more equitable societies.

They agreed to strengthen coordination for the confrontations of frequent and intense hurricanes that hit the area and the negative effects that natural disasters are having on their development.

“We reaffirm our solidarity with the Republic of Haiti, a country with which we have a historic debt of gratitude, and the commitment to continue promoting cooperation with that nation, in accordance with the priorities defined by its government and with full respect for its sovereignty”

The document called on the international community to take into consideration in its relations with member countries of the Community of Latin American and Caribbean States (CELAC)) the bloc´s proclamation of the region as a Zone of Peace, signed in Havana in January 2014. The statement rejected the imposition of unilateral coercive measures and urged an immediate and unconditional end to the economic, commercial and financial blockade imposed by the US government on Cuba, with a special emphasis on its extraterritorial nature and the persecution of Cuban financial transactions.

See details on CARICOM page

Guatemala

2019 IMF Article IV Consultation-Press Release and Staff Report
Author/Editor:International Monetary Fund. Western Hemisphere

Dept.Publication Date:June 18, 2019Electronic Access:Free Full Text. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

• • Fundamentals remain strong and growth has revived after three years of subpar performance.
  • Improved budgetary execution and monetary accommodation, broadly in line with past staff advice, are providing demand support as the economy navigates weaker terms of trade.
  • Near-term growth is poised for a rebound on the back of fiscal impulse from the 2019 expansionary budget, exports recovery after last year’s slump, and construction-driven investment.
  • Lack of progress on long-delayed business climate and public sector reforms, the Sustainable Development Goals (SDG) agenda, and financial inclusion, dampen medium-term prospects.

Series:Country Report No. 19/168
ENGLISH  Publication Date:June 18, 2019ISBN/ISSN:9781498320108/1934-7685Stock No:1GTMEA2019001Price:$18.00 (Academic Rate:$18.00)Format:Paper

Dominican Republic to hold first licensing round

HOUSTON — The Ministry of Energy and Mines of the Dominican Republic, in partnership with Wood Mackenzie, announced its first licensing round to open at an event in Houston on July 10, 2019, closing in December 2019. The Ministry is offering 14 blocks, a combination of onshore and offshore.

• During World War II, oil production was achieved in Maleno and Higuerito fields.
• Seismic data for the Enriquillo, San Juan and Cibao basins is held by the Ministry, and recent surface and seismic stratigraphic mapping has clarified the geological story of the area.
• The existing seismic data identifies undrilled prospects in the Enriquillo basin. All information is public and available at www.bndh.gob.do/en/.

Blocks on offer:

Cibao basin – six onshore blocks
Enriquillo basin – three onshore blocks
Azua basin – one onshore block
San Pedro basin – four offshore blocks

Dominican Republic

IMF Executive Board Concludes 2019 Article IV Consultation with the Dominican Republic.

On June 5,2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Dominican Republic.

• • The economy rebounded to a record high growth of 7 percent in 2018, with the positive momentum carrying into early 2019.
  • The return to above potential growth in 2018 reflected a strong private investment and consumption response to a timely monetary impulse after the slowdown in 2017, favorable external conditions and a continued strengthening of labor markets.
  • The very strong economic performance over the past several years, aided by the authorities’ policies, led to substantial reduction in poverty, inequality and continued income convergence to advanced economy levels.
  • The acceleration in activity has not put pressures on either internal or external balances: inflation remained subdued and the external position strong.
  • This allowed monetary and fiscal policies to switch to neutral-to-tightening gear in 2018, guiding activity towards potential levels.

The outlook is favorable, with moderate and balanced risks to growth. Growth is expected to moderate to around 5½ percent in 2019 and 5 percent over the medium-term, both within the estimated potential range.

The moderation will be driven by a slowdown in credit expansion, a less supportive external environment, and higher oil prices. Inflation is expected to rise gradually to the central bank’s target range of 4±1 percent with the pickup in food and oil prices.

The external position is projected to remain broadly consistent with fundamentals and more than adequately financed by FDI. Main downside risks to the outlook are weaker-than-expected external demand and higher energy prices. On the upside, the domestic demand momentum in the near term could be stronger than anticipated, reflecting the solid income growth.

Executive Board Assessment [2]

Executive Directors commended the authorities for the strong economic performance, including dynamic growth, low inflation, stable external position, and improved social outcomes. Directors noted that while the outlook remains favorable, it is subject to risks. They encouraged the authorities to take advantage of the current favorable environment to further increase the economy’s resilience to shocks by building fiscal and reserve buffers, while strengthening long‑term growth and social outcomes through reforms to address structural bottlenecks.

Directors welcomed the authorities’ commitment to improve the fiscal position, including through ambitious tax administration reforms to curb evasion, mobilize revenues, and improve governance. Nonetheless, given that public debt is trending up despite strong growth,

Directors called for further efforts to improve debt sustainability. They underscored the need for a front‑loaded fiscal adjustment aimed at widening the tax base and curtailing the electricity sector’s drag on the budget, while safeguarding fiscal space for growth‑enhancing public investment and social spending.

Directors also supported adoption of a medium‑term fiscal framework, with a clear policy anchor and fiscal responsibility elements, to ensure policy credibility and limit fiscal risks.

Given subdued inflation, Directors supported maintaining the current neutral monetary policy stance, while remaining data dependent should pressures emerge. They welcomed the continued efforts to strengthen the monetary policy framework, highlighting the dividend from anchoring inflation expectations, and supported plans to recapitalize the central bank and introduce the foreign exchange trading platform to increase transparency and efficiency of foreign exchange markets and policies. In light of the favorable external position, Directors encouraged the continued accumulation of international reserves.

Directors welcomed financial system stability and wide–ranging reforms to further enhance financial resilience. They supported the ongoing modernization of the institutional framework for systemic risk oversight, strengthening of banking regulation and supervision, and cybersecurity reforms. They encouraged the authorities to take further action, including to strengthen the supervisory oversight of non‑bank financial institutions. Directors welcomed recent progress in updating the AML/CFT legal framework and encouraged the authorities to enhance the effectiveness of the regime.

Directors emphasized the importance of continued structural reforms to address impediments to higher productivity, income convergence, and social inclusion. Building on recent gains, they encouraged further measures to improve the business environment, remove trade and investment barriers, and continue reforms to education, health, and the pension system.

Directors reiterated the need to decisively address the long–standing structural weaknesses that continue to weigh on potential growth, particularly losses in the electricity sector and inefficiencies in the product and labor markets. They also noted the need to broaden and strengthen the social security system, which will require additional fiscal space.

[table id=15 /]

Sources: National authorities and IMF staff calculations.

1/ The consolidated public sector covers the central government, decentralized non-financial institutions, municipalities, social security, non-financial public institutions, the electricity holding company, and the central bank.

2/ Latest available.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:http://www.imf.org/external/np/sec/misc/qualifiers.htm.

IMF Communications Department
MEDIA RELATIONS
PRESS OFFICER: MARIA CANDIA

PHONE: +1 202 623-7100EMAIL: MEDIA@IMF.ORG

Kingdom of the Netherlands – Aruba :

2019 Article IV Consultation Discussions-Press Release and Staff Report
Author/Editor:International Monetary Fund. Western Hemisphere

Dept.Publication Date:June 5, 2019Electronic Access:Free Full Text. Use the free Adobe Acrobat Reader  to view this PDF file

Summary:

• Aruba is a small open economy with a pegged exchange rate to the U.S. dollar.
• The island is heavily dependent on tourism and has living standards among the highest in the Caribbean.
• The economy is gradually recovering from several recessions since 2008.
• The authorities have managed well the impact of the crisis in Venezuela through diversification of product markets and tourism sources.
• Nonetheless, a deepening of the crisis is a downside risk—mainly through a potentially sizable influx of immigrants and refugees.
• And so is a potential deterioration in the outlook for the U.S. economy.

Series:Country Report No. 19/148
ENGLISH
Publication Date:June 5, 2019

IMF Executive Board Concludes 2019 Article IV Consultation with the Kingdom of the Netherlands-Aruba
June 5, 2019

On May 22, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation discussions [1] with the Kingdom of the Netherlands—Aruba and considered and endorsed the staff appraisal without a meeting.

• Aruba’s economic recovery continued last year, albeit at a slower pace than 2017.
• Following a contraction in 2015 and a modest rebound in 2016, real GDP expanded by 2.3 percent in 2017 on the back of strong public consumption and buoyant tourism growth.
• However, growth is estimated to have slowed to 1.2 percent in 2018, largely because of weaker public consumption, a slight delay in the implementation of key investment projects, and a pick-up in import growth.
• Inflation rose to 3.6 percent in 2018 from negative figures in 2016-17.
• The current account balance deteriorated to -0.5 percent of GDP in 2018, while foreign reserves remained broadly stable at 5.1 months of imports.
• The overall fiscal deficit in 2018 is estimated to have declined to 2.2 percent of GDP, from 3 percent in 2017, largely reflecting a sizable increase in revenues, but public debt remained high, reaching 84.5 percent of GDP in 2018.
• The banking sector remains sound and banks enjoy healthy profits and are well-capitalized.

Facing a deteriorating fiscal position, the Aruban authorities embarked on an ambitious fiscal adjustment program which formed the basis of a new agreement with the Netherlands, made in November 2018.

The agreement pinned down fiscal targets for 2019 and the medium term. The authorities introduced a temporary package in mid-2018 by increasing the turnover tax rate and have started to implement a series of fiscal measures beginning in 2019, as a first step toward addressing the country’s fiscal challenges and putting high debt on a sustainable path.

The economic outlook is broadly positive. The fiscal consolidation plan—while essential to put public debt on a downward trajectory—will lower real GDP growth to a projected 0.7 percent in 2019. However, this effect will be mitigated by continued strong growth in tourism from the U.S., and the implementation of multiple large investment projects in 2019 and subsequent years. Over the medium term, growth is expected to accelerate to about 1.1 percent, broadly in line with the historical average.

Inflation is projected to fall to 1.8 percent in 2019 as the base effect of the turnover tax rate hike disappears, and oil prices decrease, before gradually rising towards 2.2 percent over the medium term. The current account balance is projected to decline further in 2019 before gradually improving in the medium term while foreign reserves are foreseen to remain broadly stable at around 5 months of imports.

Executive Board Assessment 

Aruba’s economic recovery continues, although at a slowing pace. Following negative growth in 2015 and a modest pick-up in 2016, output has gained momentum over the past two years supported by strong growth in tourism from the U.S., which more than compensated for declining tourism from Venezuela.

The economic recovery is foreseen to continue, underpinned by buoyant tourism activity and the coming on stream of multiple large investment projects in 2019 and subsequent years.

Risks to the outlook are skewed to the downside. A deepening crisis in Venezuela that leads to large immigrant and refugee inflows would put pressure on Aruba’s infrastructure, labor markets, and tourism. Aruba is also vulnerable to a cyclical downturn in the U.S. economy and the short-term growth effects of Aruba’s fiscal consolidation may turn out greater than expected. On the upside, the implementation of needed structural reforms would boost potential growth and, although a remote possibility, the reopening of the refinery could bring associated investments and job gains.

The authorities are making good progress in implementing their fiscal reform agenda. They are encouraged to sustain reform momentum to keep the public debt ratio on a downward path. Reforms should be prioritized, sequenced, equitable, and well-communicated to ensure their durability. Attention should be given to ensuring that social safety nets remain effective and adverse growth effects remain manageable.

Additional measures are needed to achieve the authorities’ fiscal targets. The additional adjustment should contain a mix of tax reforms and expenditure rationalization. The fiscal measures in 2019 are expected to deliver a large upfront increase in revenues but it will be important to strike a balance between revenue increases and expenditure restraint in subsequent years.

Tax reform efforts could follow previous IMF advice and emphasize broadening the base and shifting toward indirect taxation—a VAT could be introduced in this regard. Expenditure rationalization should minimize adverse growth effects and protect capital spending and essential government services. The priorities are to rationalize the wage bill, improve the efficiency of other public spending, and contain increasing healthcare costs.

Having a robust fiscal framework is paramount. It is essential to further develop a formal medium-term fiscal framework to enhance the credibility of the consolidation plan. Eventually, a formal fiscal rule could be considered to preserve sustainability.

The strategy for budget financing and debt management needs to be finalized. Financing should avoid crowding out private sector credit or unduly pressuring international reserves. It is crucial to develop an asset-liability management framework to guide financing decisions, including the desired composition of the government-debt portfolio, and to help assess implications of alternative financing options.

The monetary policy stance and financial sector supervision and regulation remain appropriate. The CBA’s policy decisions should remain data driven, balancing domestic and external stability considerations. Tightening is warranted if incoming data or expectations point to downward pressures on international reserves. In the absence of such pressures and should risks to growth surprise on the downside, the CBA could consider unwinding the increase in reserve requirement. Banks remain sound and liquid under a solid supervisory and regulatory framework.

Aruba’s external position is broadly in line with fundamentals. In the medium term, the current account is expected to improve due to increasing tourism and continued fiscal consolidation. International reserves are adequate to safeguard the peg but should be raised over the medium term to maintain sufficient coverage.

Aruba should maintain its high-end tourism brand and diversify tourism sources. The “exhaustion effect” necessitates a focus on increasing spending per visitor, including through offering high quality services and adequate physical tourism infrastructure. Diversification of tourism sources beyond the U.S. would reduce concentration risks.

There is a pressing need to address structural challenges. The authorities are making efforts to diversify the economy including through the “promising sectors” initiative. To maximize the benefits of such efforts, Aruba will need to pursue structural reforms that:

• improve the business climate and reduce red tape;
• foster labor market flexibility while protecting workers;
• enhance human capital; and
• address governance vulnerabilities—though welcome efforts in this area are already underway.
• Increasing renewable energy use and energy efficiency and FDI-attracting structural reforms would further boost competitiveness.

Bridging data gaps would make policy-making more effective. Good progress has been made in revising the national accounts. Efforts need to continue with a focus on compiling deflators for the expenditure components of GDP. CARTAC technical assistance could help in this regard. Aruba should strive to be covered in key international surveys like Doing Business and Transparency International.

Table 1. Aruba: Selected Economic Indicators, 2014–2020

[table id=16 /]

Sources: Aruban authorities and IMF staff estimates and projections.

Note: Real and nominal GDP data reported in this table over 2010-2017 reflect the latest data compiled and published by the Central Bank of Aruba (CBA). The Aruba Central Bureau of Statistics has made good progress on the revision of the national accounts.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.

IMF Communications Department
PRESS OFFICER: RANDA ELNAGAR PHONE: +1 202 623-7100

EMAIL: MEDIA@IMF.ORG

Colombia

CruzSur Energy farmout terms with Panacol

CruzSur Energy resolved disputes with the counterparties in the Company’s original acquisitions of economic beneficial interests in the Sinu-9 Block and Tiburon Block have been and agreed terms for a new farmout agreement for the SN-9 Block with Panacol Oil & Gas.

In August 2018, the Company received a letter from Clean Energy Resources as party to the Purchase and Sale Agreement for the SN-9 Block (‘SN-9 PSA’) pursuant to which the Company initially received its 80% economic beneficial interest in January 2017, alleging that the Company was in breach of certain obligations under the SN-9 PSA and that as a consequence the SN-9 PSA was immediately terminated. The Company also received an identical letter from ColPan Oil & Gas, as counterparty to the Purchase and Sale Agreement for the Tiburon Block (‘Tiburon PSA’) by which the Company initially received its 60% economic beneficial interest in February 2017, alleging that the Company was in breach of certain obligations under the Tiburon PSA and that as a consequence the Tiburon PSA was immediately terminated. The Company refutes that either of these claims have any merit, however, it engaged with the counterparties in order to find a resolution to the dispute.

The outcome of these discussions is that the Company has agreed to terms with the counterparties whereby each party will continue forward with the original SN-9 PSA and Tiburon PSA, respectively, with certain amending terms which are outlined below.

Resolution terms for SN-9 Block with Clean

• Clean’s participation in the SN-9 Block will increase from a 5% to a 13% interest reducing the Company’s share from 80% to 72%, which will comprise two components:
  First component – the original carried working interest will increase by 3%, from 5% to 8%
• Second component – Clean will acquire an additional 5% by one of two options:
  Option 1 – payment of US$1.2 million to the Company if Clean chooses to only participate in the first phase of the exploration program.
  Option 2 – payment of US$2.9 million to the Company if Clean chooses to participate in both phases of the exploration program.
• Payment to the Company for either option will be received through the sale of 62.5% of Clean’s production on the SN-9 Block corresponding to this 5% interest. Furthermore, the share of Net Profit Interest and Overriding Royalties (as defined in the SN-9 PSA) related to this additional 5% working interest will be the obligation of Clean and not carried by the Company.

Resolution terms for Tiburon Block with ColPan

• CruzSur will earn its economic beneficial interest based on the executed work program as follows:
• 10% working interest on the completion of the Phase 3 3D seismic commitment
  An additional 15% working interest on the drilling and testing of one exploration well
  A further 15% working interest on the drilling and testing of a second exploration well
• After completing the 3D seismic commitment, CruzSur is not obligated to drill any of the exploration wells and can exit the contract with no further commitments, but will lose the US$310,000 performance guarantee currently held in deposit with the
• Colombian National Hydrocarbon Agency (“ANH”); alternatively, CruzSur may elect to stay in the license with a 10% working interest.
• CruzSur will cover, in the form of a loan, unpaid management fees of US$120,000 arising from the dispute period. This money will be returned to CruzSur if the
• Company is still participating in the block when the ANH performance guarantee is returned at the end of the Phase 3 commitment.
• In the event that CruzSur does not fulfill the Phase 3 commitment, except for reasons beyond its control, CruzSur will cede a 1.5% carried working interest in the SN-9 Block to Colpan, and forfeit the aforementioned US$120,000 loan.
• Non-Binding Letter of Intent for Panacol to Farm-in to the SN-9 Block

In parallel with resolving the above mentioned dispute, the Company has also negotiated terms for a farmout agreement with Panacol on the SN-9 Block through a non-binding letter of intent, the details of which are as follows:

• Panacol is to finance the ANH Phase 1 minimum exploration commitment of US$22.3 million through the provision of services at market rates.
• CruzSur will reimburse Panacol for its portion of these costs (“SN-9 Investment Costs”) out of 60% of its share of any commercial production realized from the SN-9 Block, after deduction of costs, royalties and Net Profit Interest.
• Panacol will share equally in the revised terms required to resolve the SN-9 dispute with Clean.
• Panacol will acquire a participating interest of 36% upon completion of the ANH Phase 1 commitments.
• Additionally, Panacol and their Seismic investor will finance the acquisition of 70km2 of 3D seismic on the Tiburon block through services up to a value of US$5 million and, upon completion of the commitment, will receive an additional 1.5% working interest in the SN-9 Block coming from CruzSur’s 36% working interest. The seismic acquisition costs are to be paid by CruzSur out of 60% of its commercial production from the SN-9 Block after costs, royalties and Net Profit Interest.
• Panacol will be entitled to receive the US$2.4 million ANH performance guarantee when returned by the ANH upon completion of the Phase 1 commitments.
• Panacol will recognize past costs of US$600,000 which are to be deducted from the SN-9 Investment Costs to be repaid by CruzSur out of commercial production.
• Panacol and CruzSur will share the SN-9 PSA commitments proportionally relative to their respective working interests, and will include:
  Carry of Clean for Phase 1 exploration commitments as defined in ANH contract.
  Should the parties elect to proceed to Phase 2, carry of Clean for the Phase 2 exploration commitments as defined in the ANH contract.
• Net Profit Interest of US$6.5 million to be paid out of 60% of production share.
  Overriding Royalty of 6% to be paid to Clean.
• Expenditures outside of the minimum work commitment will be divided between the parties in proportion to their participating interest.
  Upon acceptance of the non-binding letter of intent, the Parties will complete a definitive Farmout Agreement
• Following execution of the above agreements between Clean, ColPan and Panacol , the participating interests of the respective parties in the SN-9 Block will be as follows: CruzSur 5%; Panacol 5%; Clean 13%; Oleum 15%.

Source: CruzSur Energy