In September, violent protests at some of Colombia’s more prolific oilfields cast doubt on its recently cultivated image as a stable, business-friendly nation with a wealth of potential that had at last defeated its 1980s caricature as a chaotic banana republic controlled by drug lords and Marxist rebels. The Rubiales and Quifa fields located in the southern portion of this South American country of 44.7 million souls had been rocked by demonstrations as contract workers demanded the same wages as regular employees. The protests caused the operator of the two fields, Toronto-based Pacific Rubiales Energy Corp., to shut down operations and halt 225,000 barrels per day of production.
The company claimed contract employees had burned tents and other equipment, sabotaged pipelines and blocked roads. Pacific Rubiales was not the only Canadian company affected by the strife. Calgary-based intermediate explorer Petrominerales Ltd. had to shut in 30,000 barrels per day of production at its Corcel and Guatiquia blocks after smaller groups of protesters blocked public roads near the installations. (Production has since been restored in both cases.)
But despite a messy September that brought back memories of Colombia’s bad old days, Petrominerales president and CEO Corey Ruttan’s faith in the country was not shaken. “We view Colombia as the absolute best combination of political regime, fiscal regime and geological prospectivity out there,” Ruttan says confidently. “That’s what attracted us to Colombia and continues to attract us.”
For the casual observer, Ruttan’s praise smacks of hyperbole. Colombia couldn’t possibly be more attractive than Petrominerales’ home base of Alberta, could it? But in a world where there are few international destinations without above-ground risk (exhibit A: Libya), Colombia has emerged as a hot jurisdiction. And Petrominerales is part of a not-so-small cadre of Canadian firms who have taken a shine to the South American country. Parex Resources Inc., Gran Tierra Energy Inc, Canacol Energy Ltd., Petro Vista Energy Corp. – the list of Canadian firms operating in Colombia is surprisingly long. With the exception of Nexen Inc. and Talisman Energy Inc., this Canadian cartel is made up almost exclusively of junior and intermediate companies.
This is no surprise. In Canada’s ultra-competitive junior sector, with hundreds of small companies looking for investment dollars, start-ups often have to take risks on unfamiliar and risky locales to stand out from the crowd. “There is a real entrepreneurial spirit in the Alberta oil patch,” says Dana Coffield, president and CEO of Calgary-based junior Gran Tierra. “Because of that you see small Alberta-based companies funded with Toronto risk capital seeking new frontiers in the international arena.”
But only the strong ultimately survive. The juniors who are the most nimble and make the right calls in these risky plays are the ones that have staying power, grow production and eventually graduate from the junior sector into the ranks of mid-caps or intermediates. Petrominerales’ gambit in Colombia is a prime example of how that can be done. In 2006, when the company was created as a subsidiary to Petrobank Energy and Resources Ltd., Petrominerales was producing just 2,000 barrels per day. But from its humble origins as a junior explorer, the company has since amassed two million acres of land in Colombia and is producing approximately 40,000 barrels of oil per day. That rapid growth also resulted in the company being spun out of Petrobank as 2010 came to a close.
