As Colombia moves to ban fracking, Exxon seeks to recover investment -sources

Sintana Energy

27/04/2023 11:00

By Luis Jaime Acosta, Oliver Griffin and Sabrina Valle
       BOGOTA/HOUSTON, April 27 (Reuters) - Exxon Mobil Corp
 XOM.N  is in talks with Colombia's government in hopes of
recovering its investment in a fracking pilot project as the
U.S. oil major prepares to ditch upstream operations in the
Andean country where the government is pushing through a
fracking ban, two sources close to the discussions told Reuters.
    Exxon has held eight exploration and production contracts in
Colombia, including the fracking pilot. All either have been or
are being ended, suspended or liquidated, Colombia's National
Hydrocarbon Agency (ANH) told Reuters.
    The company had planned to develop the Platero pilot project
for hydraulic fracturing, or fracking, eyeing an investment of
$53 million, under a contract awarded two years ago.
    Colombia's congress has been preparing to pass a fracking
ban backed by leftist President Gustavo Petro, who took office
nearly nine months ago. 
    The proposed bill would ban development of non-conventional
energy projects including fracking. It has already passed the
Senate and is expected to get final congressional approval in
the coming months.
    The law would leave companies with few options to recoup
investments, according to the text of the proposal, including
options such as the chance to transfer their investments
elsewhere or be awarded rights over other conventional blocks.  
 
    Exxon is "reviewing the mechanisms to reach a solution
regarding the investments for exploring unconventional" energy
resources it has in the country, an Exxon source in Colombia
told Reuters.
    "We will continue to have constructive dialogue with the
Colombian government on a comprehensive assessment of our
unconventional investments," Exxon spokesperson Michelle Gray
told Reuters. 
    The term "compensation" does not exist in technical or legal
terminology used by the ANH in its processes, the agency said,
but Exxon is advancing an "accreditation" process regarding the
Platero pilot project.
    "The procedure is currently being studied," the ANH said. It
did not respond to follow-up questions about what an
accreditation process could include.  
    Supporters of non-conventional efforts in Colombia say the
practice would ensure energy sovereignty. Detractors have
decried environmental fall-out.
    After winning separate approvals to develop fracking pilot
projects in Santander province, Exxon and Colombia's majority
state-owned oil company Ecopetrol  ECO.CN  said they would team
up, with Ecopetrol as operator for both pilots.
    Last year, the state-run company asked the ANH to
temporarily suspend both licenses, citing uncertainty over their
future. The two companies mutually agreed to end their alliance
in November, an Ecopetrol spokesperson said this week. 
    Ecopetrol's new CEO Ricardo Roa said this week he would
analyze that company's fracking contracts "with a magnifying
glass."
    Exxon most recently decided to withdraw from its 70%
participation in the VMM-37 block it shared with a subsidiary of
Sintana Energy  SEI.V  in Colombia's Medio Magdalena region, it
confirmed to Reuters this week.
    Exxon said it continuously evaluates and prioritize
investments, including those in Colombia. 
    The company will continue in the country through its
petrochemicals and marketing businesses, the people said. 
    

 (Reporting by Luis Jaime Acosta and Oliver Griffin in Bogota
and Sabrina Valle in Houston
Writing by Oliver Griffin
Editing by Julia Symmes Cobb and David Gregorio)
 ((Oliver.Griffin@thomsonreuters.com; +57 304-583-8931;))