• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 4 days The United States produced more crude oil than any nation, at any time.
  • 3 days How Far Have We Really Gotten With Alternative Energy
  • 1 day Bad news for e-cars keeps coming
  • 3 days China deletes leaked stats showing plunging birth rate for 2023
  • 4 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
Matthew Smith

Matthew Smith

Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located…

More Info

Premium Content

Can Colombia Cash In On Higher Oil Prices?


Latin America’s fourth largest economy, Colombia, remains under considerable pressure. Even the latest oil price rally, which saw the international Brent benchmark gain 36%, has done little to kickstart the petroleum dependent economy. Colombia’s economy shrank 7% (Spanish) during 2020 and despite claims that it has returned to growth January 2021 unemployment soared to 17.3% its highest level since July last year. It is the poor performance of the Andean nation’s hydrocarbon sector which is weighing heavily on its economy. Despite claims from the national government in Bogota that the energy sector is returning to a pre-pandemic footing, there are signs that Colombia’s oil industry is struggling to restart operations.  Data from Colombia’s Ministry of Mines and Energy shows January 2021 hydrocarbon output (Spanish) declined. Crude oil production averaged 745,247 barrels daily which was 1.9% less than December 2020 and a whopping 16% lower compared to a year earlier. For the same month, Colombia pumped on average just over one million cubic feet of natural gas per day, a 1% reduction compared to a month earlier and 2% lower year over year. Total hydrocarbon output for the period reached 933,157 barrels of oil equivalent daily, a worrying 13% compared to the same month in 2020 and almost 2% less than a month prior.

Source: Colombia Ministry of Mines and Energy and U.S. EIA.

Those numbers indicate that Colombia’s petroleum industry is struggling to return to pre-pandemic levels of production, which is impacting the Andean country’s petroleum dependent economy.

A key reason for this disappointing performance is that capital spending by energy companies in Colombia remains muted. Colombia’s peak industry body the Colombian Petroleum Association (ACP-Spanish initials) anticipates $3.1 billion to $3.45 billion of investment in Colombia’s industry during 2021. While that represents a 51% to 68% increase year over year it is still significantly lower than the $4 billion spent during 2019. A chronic lack of exploration drilling combined with lower than required development activity is weighing on Colombia’s proven oil and natural gas reserves as well as production. In April 2020, the energy ministry announced that Colombia had proven reserves of 2 billion barrels of crude oil and trillion feet of natural gas, which will support another six and eight years of production, respectively. Such limited hydrocarbon reserves emphasize the urgency with which Colombia needs to boost exploration drilling if it is to continue relying upon crude oil as a key economic driver. 

Related: $70 Oil May Cause Slowdown In Demand Recovery

According to the ACP spending on exploration projects during 2020 plunged to $350 million or less than half of the $780 mill invested a year earlier. High onshore breakeven costs, estimated to be $40 to $45 per barrel after-tax, are weighing on investment, even though Brent is now at $68 per barrel and appears poised to break though psychologically important $70 a barrel mark. There were no notable oil or natural gas discoveries made during 2020, primarily because of the major drillers in Colombia slashing annual capital expenditures, particularly those funds earmarked for exploration drilling. Colombia has not had a giant oil find since 1993 when BP discovered the Llanos Basin Cupiagua oilfield which has reserves of over 500 million barrels. During 2021, the industry body expects investment in exploration activities to average around $500 million to $550 million, which while a big jump from 2020 is still well-below exploration spending. Another concern is that 45% of 2021 exploration spending is expected to be used on the search for natural gas. While it is important for Colombia to boost its meagre natural gas reserves, particularly when domestic demand for the clean fossil fuel is expanding rapidly, that does decrease the likelihood of economically crucial significant crude oil discoveries being made. The ACP anticipates that 2021 exploration spending will fund the drilling of 40 to 45 new wells drilled in Colombia during 2021, or more than the 18 wells completed during 2020 but still less than the 48 drilled in 2019.

Source: National Hydrocarbon Agency (ANH – Spanish initials).

A key metric which is a handy measure of drilling activity is the Baker Hughes Rig Count. By the end of January 2021 there were only 14 operational drill rigs in Colombia, the same as a month earlier and almost half of the 27 rigs drilling at the of that period in 2020.

Related: Is South Korea’s Monster Wind Farm Feasible?

Source: Baker Hughes International Rig Count and U.S. EIA.

That further indicates that despite energy companies in Colombia bringing production back online and increasing exploration and development budgets there is still a considerable way to go before the tempo of operations reaches pre-pandemic levels. 


A significant deterrent is growing unrest and violence in rural Colombia which is impacting the operations of the onshore petroleum industry. Security, or a lack of it, has become a leading issue for Colombia’s petroleum industry. The Andean country has experienced a sharp increase in the opposition to the hydrocarbon sector. That had led to community blockades and oilfield invasions forcing onshore oil producers to shutter operations. The severity of those community protests saw the ACP issue a December 2020 memorandum calling for a restoration of order after the seizure of oilfields in the Llanos Basin by indigenous protest groups. Oil pipeline attacks also remain an ongoing problem. The 210,00 barrel per day Cano Limon-Covenas pipeline has been attacked twice this year already, once in January and again earlier this month, it suffered 29 attacks on the pipeline last year. The Transandino pipeline which connects oilfields in the southern Putumayo Basin to the Pacific coast port of Tumaco is also a popular target, especially because like the Cano Limon-Covenas pipeline it travels through remote rugged territory. These security issues were certainly part of the rationale behind Occidental Petroleum’s decision to divest its onshore Colombian oil assets for $825 million in October 2020.

There is considerable uncertainty surrounding the recovery of Colombia’s economically vital hydrocarbon sector since the COVID-19 pandemic began in March 2020. While investment is increasing, and oil companies have reactivated shuttered oilfields both crude oil and natural gas production continues to drift lower. High breakeven prices compared to other jurisdictions are weighing on investment decisions by foreign energy companies. Heightened security risks including the petroleum industry’s deteriorating social license and opposition to the administration of President Duque further increase the uncertainty surrounding operations and the risk of production outages. Those issues are weighing on Bogota’s ability to attract the required level of oil industry investment and attempts to restart the economy.

By Matthew Smith for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News