Colombia 2020 Oil Flow Seen Flat, CAPEX Up: ACP

(Argus, 27.Jan.2020) — Investment in exploration and production in Colombia will grow by an estimated 23pc to $4.97bn in 2020, but crude production will remain flat at around 890,000 b/d compared with last year, according to an annual industry survey conducted by Colombia’s oil chamber (ACP).

Exploration investment will climb by 18pc year on year to $920mn-$1bn in 2020, with just over 70pc earmarked for onshore projects. About 48pc of the projected spending will go toward fulfilling contractual obligations, ACP said.

About 12pc of the exploration investment is contingent on regulatory progress toward developing unconventional pilot projects that proponents insist are vital to boosting Colombian reserves. ACP projects that 2020 will be a year of studies and permitting, with the first unconventional wells to be spud in 2021.

Just over a third of the 2020 exploration spending is dedicated to finding gas, reaffirming a trend toward gas-prone acreage, ACP told reporters this morning. Gas output this year is forecast at 1.09 Bcf/d, little changed from 2019.

The survey indicated that 60 exploration wells, including two offshore, will be drilled in 2020, versus a 2019 goal of 48 that will be confirmed by the National Hydrocarbons Agency (ANH) next month.

Production investment is projected to jump by 25pc to $4.05bn, with about 53pc earmarked for some 780 development wells, 15pc for enhanced recovery and the balance mainly for production facilities.

ACP notes that crude production would drop to 730,000 b/d in 2020 without the production investment, which is needed to offset an 18pc natural decline rate.

Next year’s projected upstream investment marks a recovery from 2019, when capital expenditures on exploration and production fell by 7pc to $4.03bn compared with 2018. The breakdown last year was $780mn for exploration and $3.25bn for production.

The survey is derived from 26 companies that represent 94pc of Colombian production and 81pc of exploration. The weightiest participant is Colombian state-controlled Ecopetrol, which traditionally accounts for about 30pc of exploration spending and 70pc of production spending. Including its privately managed Hocol subsidiary, the Ecopetrol group represents an estimated 40pc-45pc of exploration capex.

ACP surveyed the participating companies about Colombia’s investment climate, concluding that the non-Opec oil producer has acceptable-to-good conditions compared with its main competitors: Brazil, the US, Mexico, Argentina and Peru. The survey found that companies value Colombia’s political stability and geological prospectivity, especially for its emerging unconventional play.

The survey participants lauded the government’s reactivation of upstream licensing, but expressed concern about local contracting, regulatory and institutional stability and tax rates. One area of particular concern are “absurdly high” tariffs for oil pipelines, which are controlled by Ecopetrol, according to ACP executive president Francisco Lloreda. ACP says the tariff structure was developed some 10 years ago when price and volume forecasts were higher.

The oil chamber noted that infrastructure attacks, including strikes on pipelines, wells and tanker trucks, totaled 58 in January-September 2019, implying that the year will fall below the annual average of 104 registered for the last two decades.

ACP plans to issue a report on oil price expectations in late February.

By Patricia Garip

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