Colombia 2018 upstream capex rises, output barely
Bogota, 13 December (Argus) — Upstream investment in Colombia will grow by 30-45pc to an estimated $4.5bn-$4.9bn in 2018, but exploration spending alone will remain flat at $1bn-$1.1bn, underscoring the non-Opec country's struggle to boost reserves.
According to an annual survey by the Colombian Oil Chamber (ACP), most of next year's upstream capex is allocated to maintaining production in mature oil fields, some of which are declining at a rate of 20pc per year.
The surveyed companies, which include state-controlled Ecopetrol, assumed an average Brent price of $54/bl.
Production is forecast to inch up to 860,000-880,000 b/d, compared with an estimated 853,000 b/d in 2017, short of just over 1mn b/d reached in 2015.
This year's upstream investment totaled $3.4bn, of which $2.3bn went to production and $1.1bn to exploration. The total amounted to a 67pc jump from 2016, but it was $1bn less than the companies had originally budgeted. Investment in 2017 was less than half of 2014 investment prior to the oil price crash that year, the ACP said.
Although the number of exploration wells tripled to 54 this year compared with last year, and included an unprecedented five offshore wells, seismic activity hit a 20-year low at just 1,000km. Next year's planned 3,000km of seismic remains at just a quarter of pre-2014 levels. The ACP estimates that 60-70 exploration wells will be drilled next year.
All of the 2017 upstream activity will be onshore, underscoring a "pause" in offshore activity as companies analyze accumulated data, and review regulatory and fiscal conditions. The same holds true for Colombia's unconventional potential in the Middle Magdalena Valley.
"This year we saw an important but insufficient recovery," ACP executive president Francisco Jose Lloreda Mera said today, citing cautious optimism for 2018 and a "very uncertain" medium and long-term outlook.
Although exploration spending is not expected to grow next year, companies are focusing less on the traditional Llanos basin in favor of Putumayo and the Lower Magdalena Valley, reflecting improved security conditions there.
The oil companies expressed unanimous concern over community consultations. The ACP noted that 261,000 b/d of existing crude production is at risk because of consultations that are planned or underway in various departments, including Meta, Casanare and Arauca.
Colombia's taxes, royalties and other fiscal terms were another area of significant concern for the companies. The country's overall fiscal take is 65-70pc, rendering it among the highest in the world, the ACP says.
"We are optimistic, but we as a country have to start thinking differently," said study director and ACP economic and regulatory affairs vice president Alexandra Hernandez. "At a minimum, we need to target other types of reservoirs," she said, highlighting offshore and unconventional plays.
Lloreda highlighted that Colombia competes for upstream capital with the US, Mexico, Ecuador and Peru.
Colombia had 1.665bn bl of proven oil reserves at the end of 2016, equivalent to five years of production.