• 3 minutes Tesla is the Most American Made Car!
  • 7 minutes Should the US government be on the hook for $15 billion?
  • 11 minutes Forecasts for oil stocks.
  • 17 hours U.S. Presidential Elections Status - Electoral Votes
  • 2 mins GREEN NEW DEAL = BLIZZARD OF LIES
  • 1 hour China Producing Half of the Worlds Electrical Vehicle Batteries is Experiencing Explosive Pollution
  • 7 hours California breaks 1 GW energy storage milestone
  • 1 day Colonial pipeline hack
  • 2 days Severe Drought in the West Will Greatly Reduce Electrical Production from Hydroelectric Turbines.
  • 3 hours Beware the Left's 'Degrowth' Movement (i.e. why Covid-19 is Good)
  • 3 days Survival of Oil and Gas industry.
Oil Prices Recover After Manic Monday

Oil Prices Recover After Manic Monday

Oil prices look set to…

Futures Exchanges Gear Up For EV Boom

Futures Exchanges Gear Up For EV Boom

The CME’s Comex and London…

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

Colombia Reboots Oil Industry Despite Deadly Protests

After a devastating 2020 strife-torn Colombia has been rocked by widespread anti-government protests which were sparked at the end of April 2021 by President Duque’s proposed tax reform. Authorities’ heavy-handed repression of the protests which sees 77 dead, with 40 of those at the hands of police and security agencies according to think tank Indepaz, sparked a series of road blockades across Colombia. Those have prevented onshore oil companies from resupplying their operations and transporting petroleum by road, forcing many to shutter production. The regions among the worst affected are the Putumayo and Middle Magdalena Valley Basins, forcing Colombia’s fifth-largest oil producer Gran Tierra Energy to shut-in 5,250 barrels of oil production. This is because most of the driller’s developed oil reserves and producing fields are in those two basins. The overall impact of the protests and related blockades on Colombia’s economically vital oil industry has been severe. Colombia’s energy minister Diego Mesa released data showing that national oil production fell below 700,000 barrels per day during May 2021, the first time since 2009 when national oil output averaged 670,526 barrels per day. Mesa went on to claim the blockades had forced up to 48,000 barrels of daily oil production offline and cost the combined energy and mining sectors over $69 million. Regardless of those events, Mesa believes that Colombia will still pump on average 780,000 to 800,000 barrels per day during 2021, although that is dependent on the blockades being lifted. It is worth noting that the forecast is well above the daily average of 745,305 barrels pumped for the first four months of the year, meaning it likely will not be achieved unless there is a significant lift in production during the second half of 2021.

Despite signs that the anti-government protests are easing, boding well for Colombia’s economically vital energy sector, there is still considerable uncertainty. The national strike committee, which is composed of 27 different organizations including unions, student and civil society groups has failed to reach a concrete agreement with the national government. This is in part due to the Duque administration’s unwillingness to negotiate unless the roadblocks are lifted but also because of the different agendas of the groups comprising the coalition, which lacks the ability to compel protestors to lift blockades. In many regions, notably the departments of Meta, Cauca, and Putumayo, the blockades are being driven by long-standing local grievances concerning violence and lack of access to vital economic resources. The petroleum industry in many of those areas is also facing a crisis with its social license deteriorating because of the push to introduce hydraulic fracturing and local environmental damage caused by oil extraction. That is particularly notable in Puerto Gaitan where oilfields were subject to violent invasions before Colombia’s national protests commenced. Nonetheless, according to Colombia’s defense ministry, there were only 18 active blockades (Spanish) as of Friday last week compared to well over 2,000 at the peak. That bodes well for the ongoing reactivation of the crucial energy sector.

Related: How An Oil Pipeline Hack Sent Bitcoin Prices Tumbling

Regardless of the protests and failure to reach a negotiated outcome with the strike committee, which would bring them to an end, Colombia’s energy ministry is pressing ahead with reactivating the energy sector. This saw the ministry announce, last week, (Spanish) the launch of Colombia’s hydrocarbon round 2021. Colombia’s hydrocarbon regulator the National Hydrocarbon Agency (ANH – Spanish initials) is offering 32 blocks to energy investors with four nominated by energy companies and the remaining 28 offered by the agency. The ANH’s 28 blocks are composed of five onshore blocks in the Lower, Middle and Upper Magdalena Valley as well as the Llanos Basins and 23 offshore blocks in the Urabá, Sinú - San Jacinto, Chocó Continental, Chocó Offshore and Tumaco Basins. 

Colombia

Source: ANH.

Public hearings for offers and counteroffers for the blocks being offered will be held in November and December with contracts to be signed during the last month of 2021.

This is an important development for Colombia because the reactivation of the hydrocarbon sector is key to rebuilding an economy shattered by the pandemic, which shrank nearly 7% during 2020. Bogota is focused on expanding investment in the oil industry with higher foreign direct investment and oil production important drivers of fiscal revenue as well as GDP. This is particularly important because Colombia’s economy is dependent on hydrocarbon production to grow yet possesses very meager oil and natural gas reserves. For 2020, which was an abnormal year due to the pandemic and oil price crash, petroleum was still responsible for 17% of government income, 3% of GDP, and 28% of exports by value. Prior to the August 2014, oil price crash petroleum generated more than a fifth of Colombia’s fiscal revenue, 55% of exports by value, and nearly 5% of GDP. During 2013, the Andean country’s GDP grew by an impressive 5.1%, which was primarily due to growing oil production, which for the first time ever broke through the million barrels per day mark to average 1,008,178 barrels daily. Those numbers underscore just how important the exploitation of hydrocarbons has become for Colombia’s economy.

Despite being a major oil producer in Latin America, the region’s third-largest, Colombia does not possess significant crude oil reserves. The oil-dependent country’s energy ministry stated earlier this month that by the end of 2020 Colombia had proved oil reserves totaling 1.8 billion barrels, an 11% decrease compared to a year earlier, and 2.9 trillion cubic feet of natural gas an almost 7% year over year decline. Those proved oil reserves will only last for just over six years at current production levels, which are 16% lower than 2019 and nearly eight years for natural gas despite current output is 1% less than 2019. These numbers demonstrate that Colombia urgently needs to make major hydrocarbon discoveries and rapidly expand its proved reserves if it is to avert an economic crisis. Unless that occurs, or Colombia rapidly reduces its economic dependence on oil production, it is facing a near-term economic crisis when those limited hydrocarbon reserves are drained. That would be a catastrophic event for a country riven by political turmoil, poverty, and corruption, which was once regarded as one of the best-performing economies in Latin America.

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