Colombia’s oil sector in 2021 is expected to see a continuance of Covid-19’s dampening effects that beset it in 2020, according to industry leaders and analysts.
A measure of the pandemic’s impact is that Colombia’s output in 2020 is averaging 100,000 b/d less than it was in 2019. A small fraction of that decline was anticipated prior to the pandemic, due to the aging of the country’s major oil fields. But the bulk of the miss is due to declining demand and the restrictive work rules imposed by wildcatters to protect office and oil field employees from the virus, resulting in the closure of some 50 oil fields last spring.
The Colombian Petroleum Association (ACP) and S&P Global Platts Analytics expect Colombia’s crude output to average about the same or a little better than the 775,000 b/d expected for 2020.
With crude and gas reserves trending down, Colombia also has longer term problems. Its energy self-sufficiency rides on successful exploitation of unconventional deposits associated with shale and coal in the northern Magdalena River valley. Geologists have estimated those reserves as high as 7 billion barrels, second only to Argentina among Latin American nations.
So far, development has been blocked by opposition from farmers and activists who warn fracking could damage the environment. Four pilot fracking projects designed to demonstrate what backers say are the benign impacts of the drilling method will likely go forward in 2021, although the projects still lack environmental agency approval and actual drilling is unlikely to start before 2022.
US oil giants ExxonMobil, ConocoPhillips and Occidental Petroleum have expressed interest in getting involved in Colombian fracking projects. Ecopetrol, the state-controlled giant, has formed a joint venture with Oxy in the US Permian Basin partly to prepare for exploiting unconventional reserves at home.
If the unconventional deposits don’t pan out and no other new crude sources are found, Colombia could see its output fall to below 600,000 b/d by 2032, according to Platts Analytics.
Colombian president Ivan Duque backs fracking not just to maintain energy self-sufficiency but because his country badly needs the cash. The country’s oil revenues from exports collapsed to around $9 billion this year, from recent highs of $29 billion in 2014.
A positive sign that production may stabilize is that Colombia could see around 50 exploratory wells drilled in 2021, up from only 16 in 2020, said Alexandra Hernandez, vice president and research chief at the Colombian Petroleum Association trade group. But exploratory activity will still be far below the 120 or more wells that she says Colombia needs every year if it is to maintain energy independence.
Crude oil reserves are also in doubt. Independent consultants put the yearend 2019 total at 2.04 billion barrels, a 6.4-year inventory at current production rates, or about even with 2018. But Ecopetrol, which claims the lion’s share of that total, warned in October it may have to de-book 15%-20% of its reserves due to the drop in crude prices this year.
Re-orienting exports to Asia
The energy ministry has revived a plan to build a 780-km pipeline from heavy oil fields in eastern Meta state to the Pacific port of Buenaventura to better access increasingly important Asian markets.
South Korea, Vietnam and especially China have become crucial markets for Colombian oil. Exports to China last year reached 12.79 million mt, up 36% from 2014, according to the DANE government statistics agency.
Since Colombia’s only major export depot is at Covenas on the Caribbean, such a pipeline would save enormous transport costs incurred in shipping crude to Asia through the Panama Canal or around the Horn of South America.
A new Pacific pipeline would also enable crude shippers to avoid the Cano Limon-Covenas pipeline, which is regularly bombed by leftist guerrillas and tapped by oil thieves.
A bright spot in the country’s oil industry has been its refining sector, which is reaping the benefits of a newer refinery.
Colombia’s two main refineries in Cartagena (165,000 b/d) and Barranquilla (220,000 b/d), owned and operated by Ecopetrol, expect to see combined throughput average between 340,000 b/d and 365,000 b/d in 2021. There is also a 50,000 b/d capacity addition expected at the ultramodern Cartagena refinery by 2022, following a $48 million expansion that’s now underway.
The relatively new Cartagena refinery is finding lucrative markets around the Caribbean and beyond for its cleaner burning fuels especially diesel.
A measure of the refining sector’s success is that throughput at both facilities remained relatively stable in 2020 as exports made up for a sharp decline in the domestic consumption of gasoline (17%), diesel (12%) and jet fuel (58%), according to the ACP.