Colombian oil companies plan between $4.5 billion and $4.9 billion in investments in 2018, increasing their budgets from this year, but still missing the mark on how much capital is needed to maintain an active fossil fuel industry, according to a new report by Reuters.
The new figures reflect a jump of roughly a third compared to last year’s figures, the Colombian Petroleum Association said on Wednesday.
Usually, twenty percent of government revenues come from the exploration, production, and taxation of petroleum products in the country, but three years of low oil prices have lowered that proportion to almost zero. Colombia’s oil and gas is difficult to extract, and trades at a significant discount to Brent. Ecopetrol and foreign field operators need prices to be higher than $50 to turn a profit.
Last year, Colombia was one of several South American countries selling oil below the cost of production.
“We value the process of recuperation of the industry, but it’s a recuperation that is lower than expected and lower than what the country needs to look toward the future,” ACP President Francisco Jose Lloreda told journalists.
“We look at 2018 with moderate optimism - there is interest from companies in making an important investment in production and exploration, that hopefully will be firmed up, but it’s short term. At medium and long term there is great uncertainty that we hope will dissipate,” Lloreda said.
Colombia’s oil production has been falling for the last four years. It’s not just the 2014 price crash that pressured output: The country’s fields are depleting and new discoveries are hard to come by because of high production costs, security challenges, and opposition from the population.
Earlier this year, Colombia’s Comptroller General warned that the country could lose its energy independence by 2021 if this state of affairs continues. If production continues to fall, state-run Ecopetrol will find it hard to service its refineries, which have a combined daily capacity of 420,000 barrels.
