Colombian Government Talks Oil Production

Ministry of Mines and Energy (MinMinas), German Arce, participated in the ‘Leadership and Energy Markets in Latin America’ forum, where he spoke about oil production and his perspectives on the issue.

Arce said oil production could stabilize at 850mbd (850,000 barrels a day) or an even slightly higher figure this year, since he believes that there are the right conditions to achieve this number and meet this year’s extraction target.

"I think we have reached a point of stabilization. This year's production target, which is around 850mbd, we are meeting it. We could be a little higher than that, with stable levels of oil prices," he said.

However, this figure is lower compared to 2016’s value, when the sector produced 885mbd on average.

The government had pledged to help boost exploration and investments to increase oil and gas reserves this year and oil production has continued to fall in the country, as it stood at 858mbd on average in August.

"Our eyes are on the development of enhanced oil recovery projects, and the development of offshore exploration and production activities," Arce said last year.

The President of the National Hydrocarbons Agency (ANH), Orlando Velandia Sepúlveda, also spoke about offshore, self-sufficiency and other relevant issues for the industry.

He said that the Colombian Caribbean coast should continue to prepare its offer of goods and services to the offshore industry, and cities like Barranquilla in the Colombian department of Atlántico will be key in this process.

He pointed out that offshore discoveries like Kronos, Orca, and Purple Angel, among others, have increased expectations, but there is still a lot of work to do.

"(The discoveries) are positive, but much remains to be done from the point of view of the certainty of these findings," he added.

Velandia commented that the sector will continue to study deposits, evaluating reserves as well as the quality of resources found.

The head of the ANH said the government hopes to confirm offshore oil deposits in a short period of time and this will improve the industry’s prospects.

He said that the Caribbean Sea has received large exploratory investments during the last two years, and this happened in a low-price environment, which is very remarkable. Especially since the industry’s heavyweights participated in the process.

In addition, Velandia said that government’s measures helped maintain contracts during the oil crisis in 2015, which will assure important investments in the coming months.

"This year, investments will materialize. We will not lose oil self-sufficiency, but that depends on joining efforts,” he said.

Velandia stressed that oil companies recognize the importance of peace processes as the sector is developed mainly in conflict zones and that the government is talking with communities to resolve social unrest.

Bottom-Line: Based on MinMinas’ statement, the trend is to ‘go back in time’ to levels last seen when the country was coming out of its previous self-sufficiency crisis. If the government keeps doing very little...

Arce’s ‘strategies’ will not increase oil production this decade. Offshore is unlikely to produce oil at all (most expect only dry gas) and if it does, not for at least 10 years. Enhanced Oil Recovery (EOR) is already being extensively used but it seems only to be able to compensate for other declines.

Offshore projects might bring great results for gas self-sufficiency, but there are no great expectations about crude. However, without ‘liquids’, many in the industry question whether the country’s offshore gas will ever be commercially viable.

Only new onshore discoveries will raise production.

Colombian oil sector succeeded in overcoming the price crisis positively, and the peace process with the Colombia’s ‘Revolutionary’ Armed Forces (Farc) has dramatically reduced security incidents, but the country began a new and significant social crisis, at the same time. This may be worse than low prices and the government must do more to help the industry overcome it.

To us, it seems like Colombian authorities are happy with a production of 850mbd and the next government will have to solve problems such as the anti-oil referendums and social unrest.

Can the sector wait that long?

Tags: colombia, energy, hyrdrocarbons, latam, oil and gas
Posted in LatAm, Energy, Energy