“THE MOVE IS NOW FOR GAS AND OIL”

Four decades ago, little Augusto, the second child of Eduardo Jiménez Neira, used to enjoy his school vacations in a way rather different from other kids his age.
While his friends looked forward to the arrival of vacation time to travel to the beaches or to play around in “fincas” and resorts, Augusto asked his father to take him along to the fascinating world of oilfields.
It was the seventies, and the then president of ECOPETROL, Mario Galán Gómez, used to travel along with Jimenez Neira, a member of his Board of Directors, to take a look at the oil country. Thanks to such tours, Augusto Jiménez learned to love and know the geography of Colombia, a taste and a knowledge he has managed to capitalize: since eight years ago, the North American company Drummond of which he is the President, has been the mining company of greater expansion in the country.
This company is to a great extent responsible for positioning coal as the second export product of Colombia. This lawyer, expert in energy law, is now facing a new challenge. Aware of the fact that his company will increase production of coal from 16 to 22 million tons this year, and knowing that he has 300,000 more hectares to be explored, he has just envisaged the business of hydrocarbons, since from the results of geological studies in the Departamento del Cesar, it is apparent that under the layers of coal there could be interesting accumulations of methane gas, natural gas and eventually oil. “Besides coal, we would now like to find methane gas, natural gas and oil” is one of the confessions made by Jimenez in an interview with Carta Petrolera.

¿What was the motivation behind Drummond for the incursion in an area different to the coal business?

First of all, there it is our confidence in the country. One way or another we have invested in the country about 2,000 million dollars during the lifetime of our coal project at La Loma (Cesar). Besides, ever since 20 years ago our company has been a pioneer in the United States, as well as worldwide, in the development of the gas associated to coal.

¿Does it mean, it was high time for you to explore this front of activity in our country?

Yes. At Drummond we know better than anyone the geology of the Cesar, since we have studied the 10,000 hectares of the area La Loma (main coal mine in the Departamento del Cesar) and the 30,000 hectares surrounding the regions of Descanso, Guaymaral, Rincón Hondo and Similoa. We have made enough geological studies; and from the scientific and seismic information we have collected we can infer that there are interesting probabilities of finding methane gas.

¿Is the coal business so good as to allow you to bet one of the tokens to hydrocarbons?

I would put it this way: Mr. Drummond ( the owner of the company who is resident of Alabama, USA) is so confident in Colombia that he entered the coal business down here and is now looking forward to entering the methane and petroleum businesses as well. Look, Drummond is deeply involved in Colombia. There are more than 80,000 persons who directly or indirectly have benefited from the coal project. More than 2000 direct jobs and 8000 indirect jobs have been created by the company in Colombia. We have developed community projects in the areas of education, health, recreation, sports and culture around the area of influence of the mine, the port and the railroad. We generate important oyalties and taxes for the whole area of the Cesar in particular, and for the country in general.

Your company has been in the coal business around the world for over fifty years ¿why risking money and efforts in something uncertain?

If we add our research of the coal region to the upcoming expansion projected for the mine, where we are going to need the generation based on gas of about 90 megawatts of energy, we have every reason to devote part of our investments in Colombia to the new front of operations.

Let us go to numbers. ¿How much gas can you extract out of a ton of coal?

That depends on several factors, mainly, the type and the maturity of coal. A very productive basin in the United States may be able to produce 500 cubic feet of gas for every ton of mineral. At the Cesar we expect to get between 60 and 200 cubic feet per ton of mineral.

¿What coal production are we talking about?

I must make clear that the management of mining is totally independent. I will explain through an example, even though there are exceptions: between 0 and 300 meters is comprised the area where coal is to be mined; between 300 and 700 meters it is possible to extract methane gas; and, we are looking for hydrocarbons at depths around 3,000 meters in the Cesar basin. Therefore, there are three well defined areas of exploration.

¿And what are you looking for?

We look for them all: methane gas, natural gas and petroleum.
Remember that for this area of the Cesar, right now we have three different rights (or licenses): one to explore for coal, another to explore for methane gas and the third one to explore for natural gas and hydrocarbons.

¿Do you mean that you hope to find oil in this area?

Yes, of course. There could be oil

¿Could it be?

According to the current available information it can be concluded that there is a good certainty for the presence of methane gas, a close certainty for the presence of natural gas and less certainty in regards to the presence of liquid hydrocarbons, since the information is not complete as yet.

¿How much information do you have on the existence of possible hydrocarbon oilfields?

We have some basic seismic information given to us as part of the exploratory contracts signed on December 23, 2003 (La Loma and La Loma GMAC with 231.747 hectares).

¿What are the initial exploratory plans?

We have the basic seismic information plus information from ECOPETROL. All this knowledge is being evaluated and we are now in the process of shaping up the work teams to begin exploring.

So, you will have different companies. Sort of a holding company to the interior of Drummond?

Not necessarily. What we do is to create different and specialized departments within the same company, namely the Methane department, the Coal department and the Hydrocarbons department

¿One would think that part of the budget that Drummond intended to invest to continue extracting coal will go to the other businesses. Is that true?

Our heart is with coal right at this moment, since it is coal which has given us everything; not just to the company, but to the country as well. Imagine that the mine started with a production of 500,000 tons in 1994, last year it ended producing 16 million tons and this year it will reach 22 million tons by itself, equivalent to 60% of the whole production of this mineral in Colombia.

THE EXPECTATIONS

¿When do you plan to begin drilling to search for hydrocarbons?

It is well understood that drilling for coal is much more superficial than what it takes for methane gas of for petroleum. We will have to do a better study of geology before we engage in the underground mining demanded by the search for hydrocarbons. However, the contract allows us for a period of three years before drilling the first well. In the case of methane gas we must drill two wells per year; and for independent hydrocarbons (natural gas and oil) one per year, as a minimum.

¿How much have you drilled and what coal reserves have been retrieved?

We have drilled almost 100 meters and we still continue with an open cut mine, which means we are talking about super-ficial mining. So far we have identified reserves in the amount of about 2000 tons, among the different projects we have.

¿When is drilling for methane gas, natural gas and petroleum due to start?

The type of drilling required by the licenses for methane gas and hydrocarbons calls for deeper drilling. As a matter of fact, we will have to make seismic and geological studies different from those used for coal. Yes, we are going to drill wells to extract those hydrocarbons according to commitments made at the time of signing the contracts.

Let us play a little futurology ¿what do you expect out of the natural gas to be found?

First, we intend to build the generating plant for internal consumption of our coal project at La Loma. Nobody doubts today that Colombia is an important source of coal. We want to position the country for gas, the same way. In other words, we can see that in the middle term the gas producing countries will be positioned in an interesting way as sources of supply in such energetic area, and we want to be there.

¿What do you expect out of methane gas?

We want to keep ourselves as pioneers and become the exporters of this energetic in Colombia.

¿What do you expect out of the eventual petroleum discovery?

The risk here is bigger, but obviously if we are successful, the relationship of profit margin for oil is better than that for coal… however, if we are not successful we will loose our money!