Investment in exploration and production (E&P) in 2018 increased for the second consecutive year, reaching an execution level of USD 4.350 million, which represents a growth of 281% compared to 2017, according to the E&P Investment Trends Study in Colombia 2018 and Perspectives 2019, prepared by the Vice Presidency of Economic and Regulatory Affairs of the Colombian Petroleum Association (ACP).
- E&P investment in 2018 increased for the second consecutive year, reaching an execution level of USD 4.350 million.
- The exploratory level continues to be insufficient for long-term macroeconomic and energy stability.
- Geological potential, contractual aspects, fiscal issues, regulatory stability, and social aspects are the most important for investment decision-making.
The study records the effort in production investment which showed an increase of 541%, driven by better international oil prices, which allowed in the second half of the year to offset the natural decline of the fields and slightly increase production compared to 2017, placing it at 865 thousand barrels per day.
However, the study highlights that investments in exploration have stabilized at around USD 1.000 million annually since 2015, and in the last year an exploration investment of USD 800 million was recorded, which is 271% less compared to 2017.
Although investment on land showed a growth of 241%, the decrease in total exploratory activity is mainly due to the increase in project costs and their greater complexity. Likewise, the study indicates that approximately 131% of the exploration investments budgeted for this year were postponed due to delays in environmental procedures and surrounding issues.
“It is very good news that for the second consecutive year investment in the sector has grown, reflecting a slow but sustained recovery. However, investment in exploration remains very low and insufficient; if we do not give it a decisive boost, sooner or later production will fall, and the medium-term scenario will be even more concerning. The Government understands the situation well and is taking measures to reduce legal uncertainties and make new areas available that encourage investment,” said Francisco José Lloreda Mera, Executive President of the ACP.
Outlook 2019
According to the preliminary budgets of the companies, it is estimated that in 2019 approximately USD 4.950 billion will be invested in E&P, which would mean a growth of 141% compared to 2018. The focus will remain on production, whose preliminary budget will be around USD 3.900 billion; in this scenario of increased investment, which will focus on development drilling, enhanced recovery, and new production development, a growth between 21% and 41% in production is expected compared to 2018, which would be between 880 and 900 thousand bpd (890 thousand bpd on average).
“Without a doubt, the production outlook we see fills us with optimism; greater production means more resources for the National Government's investment programs and more royalties for the regions, benefiting Colombians, as we could see reflected in the second half of this year with the biennial royalty budget,” affirmed Lloreda Mera.
Investment environment
The Trends Study also evaluated the most relevant aspects for the investment decision-making of companies. In order of importance, geological potential, contractual and fiscal aspects, regulatory stability, and social aspects stand out. Of this group, only geological potential was rated as a strength of the country, while the others were rated as weaknesses in Colombia, with social aspects showing the most negative trend.
Other evaluated aspects included: operational security, environmental aspects, infrastructure availability, prior consultation, political stability, and local competitiveness of goods and services. In general, the trend of improvement was only recorded for contractual aspects and political stability.
Consult the E&P Investment Trends Study: [prefix_icon icon=»icon: file-pdf-o» url=»https://acp.com.co/web2017/es/asustos/economicos/455-informe-economico-tendencias-de-inversion-e-p-en-colombia-2018-y-perspectivas-2019/file» background=»#fa6200» color=»#ffffff» size=»90» radius=»20px» padding=»20px» margin=»20px» border="1px solid #ffffff"]
Colombian Association of Oil and Gas