BP TAKES A FURTHER LOOK AT GAS

Ever since last decade, the name Cusiana has been synonymous with the best oil ever found in Colombia, one of the better appreciated in the world markets. Today, due to the declination of production of liquid hydrocarbons, Cusiana and is headed to turn into the greater provider of natural gas for the interior of the country.
In other words, Cusiana and Cupiagua, the oilfields turning out in the past more than 800 million barrels of crude oil have began to contribute great production of millions -not of oil barrels, but of cubic feet of gas -. And this is happening very fast. In an exclusive interview with Carta Petrolera, the president of British Petroleum in Colombia, Felipe Posada, confirms that the gas currently beingconsumed by more than a million families in Bogota comes from the depths of the Los Llanos foothills; and that it has been decided by the company to build the gas treatment plant of Los Llanos foothills. He also confirmed that the company has redefined its business in Colombia and it would now be interested in entering into heavy crude oil projects and that changes to the present contract may have fallen short of complete.

Four months ago your company announced lack of success in the exploration of Niscota ¿ what is expected in the future,after drilling the first well?

The Niscota 1 well could not identify the presence of commercially exploitable hydrocarbons. However, the well did provide very valuable geological information which we are using to reinterpret the seismic area and determine additional prospects that may exist. Niscota’s history is by no means completely written; however, it does confirm that the geology of Los llanos foothills presents many complexities.

¿Does it mean BP is still interested in Niscota?

We need some more time to do this reinterpretation work before we can make a decision. We applied for an extension of the term of exploration. Only upon confirming the existence of a structure and confirming that it is viable, we will be able to make a final decision as to whether to continue.

BP has been the business icon identifying great discoveries in Los Llanos foothills with Cusiana, Cupiagua, Floreña and Pauto, among others, ¿is there any interest in some other block in that area?

We have tried to concentrate on what we have, namely big blocks and oilfields with meaningful complexities; and we do not want to distract our efforts in other areas. I can not visualize us looking for another exploratory block in the near future with the Agencia Nacional de Hidrocarburos. However, the Llanos foothills continue to appear with good prospects.

¿What to do in the face of declination of production in the oilfields of the foothills?

We know the fields have entered into a process of declination. This a difficult situation we are facing and we are doing whatever it takes to keep stable production levels, as much as we can. Despite declination of liquids (crude oil) we aware that both Cusiana and Cupiagua offer gas in great quantities; and therefore, we have set up some very interesting plans to extract such production of gas, which will allow the country to have a second strategic source of supply of gas for the interior of the country at very competitive prices.

¿How does the gas treatment plant fit into this new scenario?

This subject has been discussed for a long time and it has been very laborious, since the market for gas in Colombia is still in its infancy and we needed to make headway in many aspects. However, the last few months have presented great advancement in the regulatory aspects, specifically in reference to the subject of the transportation tariffs, which has brought about a real coming closer together between buyers and sellers. On this basis, we are now ready to sign the supply contracts.

¿Does this provide the green light required to unblock the execution of the plant?

Yes. The treatment plant will be an expansion of the present plant which would take us to an installed capacity of 180 million cubic feet of gas per day. If the consumption of the country is about 600 million cubic feet per day, we would be capturing about 20% of the gas market in Colombia, mainly supplying Bogota, Cali and the interior of the country

¿What level of investment would it be required for this project, who is going to finance it, and when would the construction of the plant start?

The treatment plant will cost about US$150 million. We will build it together with our partners in Cusiana, namely Ecopetrol and Total; and the construction will begin by the second quarter this year. Ideally, it should be finished around the middle of the coming year.

¿Could you supply more gas for Bogota right away?

As a matter of fact, we are already supplying gas to Bogota. At the beginning, our initial plant allowed for production of 20 million cubic feet per day. This year, production was increased by 50 to 55 million cubic feet; so, we are currently shipping to the interior 70 to 75 million cubic feet per day. t is a fact that all gas consumed by Bogota at this time, comes from Cusiana.

Such gas reaches the end consumer, but ¿is there any negotiation for industrial purposes?

Yes. We are beginning to sell gas to an energy generating plant by the name of Termoyopal, a partnership made by different investors in the region It will be gas coming not from Cusiana, but from other fields in the foothill, namely Pauto and Floreña. This gas will have a social function, since it is intended to be converted into electricity which will greatly help the development of the industrial sector of Casanare.

¿Does this point to a redefinition of the business of BP in Colombia, since now you are not only looking for oil but you intend to develop the existing gas as well?

We continue to optimize the production of crude oil, but are also aware of the existence of important gas reserves which we must convert into money; and we have to sell them in the market to capture its worth. That is what we are doing.

BP FOR A LONG TIME

¿How is Colombia ranked in the classification of countries where BP operates?

Colombia continues to be an important operation generating cash for BP; this is well known to everyone in London. Colombia is a critical part of the of the great business portfolio of BP. The business plan through 2009 is solid and considers a declination of the liquids which is to be compensated by an equivalent number of barrels brought about by increasing production of gas.

¿ And what can it be expected from BP beyond the joint venture in the gas treatment plant?

We are considering other options which could generate some additional benefits, like in the case of Niscota, the heavy crude, and the extension of the contracts of association mentioned by the government.

¿Is BP interested in the development of heavy crude oilfields?

Obviously, in the face of declination in the production of liquids, we are looking for strategic opportunities that may allow us to compensate for it. We could think that these heavy crude oilfields possibly holding important reserves and which have not been developed adequately due to the need for technology and for important capital investment could be interesting candidates for a company like BP which has the resources and technology required and that in addition, owns the infrastructure located not too far from the location of the heavy crude. We have had preliminary conversations about the possibilities in this area; however it is still premature to talk about concrete projects.

¿Looking back, could we interpret that as far as our country is concerned,Colombia for BP lies more in the past than in the future?

No, future plans are solid and straightforward; however, they are different from past plans. The implementation of such plans will provide for the company growth and opportunities to look for new businesses in Colombia. There is no doubt that BP is here to stay for a long time. BP has been the company making the largest investments in the sector and possibly in the country, with investments close to US$3,000 million over the last ten years. The drilling of the Niscota well last year cost us about US$70 million, and we will continue investing. The case of the gas treatment plant is a good example of the investment of yet US$120 million more.