2013-12-14 10:39:26 - New Energy market report from Business Monitor International: "Colombia Oil & Gas Report Q1 2014"
There is optimism with regard to the future of Colombia's energy sector; particularly as improved security dynamics and a more liberal business environment have led to increased investment in exploration and production. The most recent licensing round and increased interest in the country's offshore potential will also contribute to greater foreign investment and exploration into the sector, leading to further growth in proven reserves and buoying the robust long-term production picture.
The main trends and developments for Colombia's oil and gas sector are:
* An improving security situation and the country's attractive fiscal regime are likely to continue to attract significant levels of foreign investment into Colombia's oil sector. Production has grown by more than 70% since the mid-2000s and we
expect that upward trend to continue. Preliminary monthly data from the EIA shows that production has exceeded the 1mn barrels per day (b/d) threshold in 2013, and by 2017, we forecast crude, NGL and other liquids production to reach 1.2mn b/d, making it one of Latin America's top oil producers.
* We have slightly reviewed our reserves growth forecast downwards. We now forecast it will reach 2.7bn barrels (bbl) by 2017, with steady further growth through the end of our forecast period. While oil discoveries are made on a regular basis in Colombia, discoveries have tended to be of modest size. The country's crude reserves of 2.2bn bbl represent about seven years' worth of current supply, but with production growth increasing fast, Colombia has not yet managed to move beyond the six to seven years of reserves level. Nevertheless, we maintain an overall favourable outlook towards oil reserves growth in the country. With increasing foreign investments and if current exploration investments and activities bear fruit, proven oil reserves could be reviewed to the upside.
* Although most investment has been aimed at tapping Colombia's oil reserves, the effect of rising investment is also being felt in the gas sector. Gas production has nearly doubled in the last decade and we see scope for strong growth in the years ahead. Output is forecast to rise from an estimated 11.3bn cubic metres (bcm) in 2012 to 13.5bcm in 2017.
* Rising oil demand is fuelling investment in the downstream sector. Ecopetrol's Bolivar refinery in Cartagena, the country's second biggest facility, will be upgraded over the course of 2013 and 2014. The expansion project, which received a US$2.84bn loan from the US export-import bank, will see the plant's capacity rise from 80,000b/d to 165,000b/d. Furthermore, the 50,000b/d expansion of Ecopetrol's Barrancabermeja refinery should bring the plant's capacity to 300,000b/d.
* Although the country has been successful in attracting rising foreign investment, state-run Ecopetrol will remain the engine of growth. Indeed, the company unseated Petrobras in 2012 to become the largest oil company in South America, according to Platt's 2012 Top 250 Global Energy Company Rankings. The company is also expected to benefit greatly from the most recent licensing round, where Ecopetrol was one of the biggest bidders, securing 11 blocks.
* Preliminary results indicate that the country's most recent licensing round was a success. Colombia's energy sector regulatory body, the ANH, reported that it received 105 offers in its first and second rounds, with 50 out of a total of 115 blocks awarded. Of these, six are located offshore, with the remainder onshore. However, only five of the 31 blocks with unconventional resource potential were awarded.
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Colombia's dependence on oil prices leads to high volatility in the country's export revenues. As such, our assumptions of falling oil prices in 2013 and 2014 pose a considerable downside risk. As the US remains Colombia's primary crude export market, an additional downside risk remains the expected fall in US oil imports on the back of its own oil production boom. It's likely, then, that an increasing amount of Colombian exports will be sent to Asian importers instead.
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