In 2023, private investment in exploration will fall by 33% in Colombia.

• Total exploratory investment (state and private) in 2023 will fall 4%. In the case of private regime companies, it will decrease 33%, while that of the state-owned will increase.

• In 2023, it is expected to drill between 55 and 60 exploratory wells, for an average oil production of 770 bpd and a gas production potential of 1,183 mpcd.

• 60% of the investment in 2023 will be in natural gas, especially on the Caribbean Coast. In terms of oil production, the departments of Meta and Casanare will lead the way.

The Colombian Association of Oil and Gas (ACP) presented the economic report ‘Investment Trends in Oil and Gas Exploration and Production (E&P) in Colombia 2022 and Outlook 2023’; this is the ninth edition of this annual study that also includes an analysis of the global investment climate and that of the country.

The document reveals that the investment in exploration for 2023 will be USD 1.240 billion, 41% less than in 2022 when it was USD 1.290 billion. This is due to the fact that, although the investment in exploration by the state company will increase, that of private companies, according to estimates, will be between USD 650 and USD 700 million, 33% less than in 2022.

“The decline in exploratory investment from private companies is mainly due to uncertainty, and the increase in exploration by Ecopetrol would be due to the search for reserves, with an emphasis on offshore,” said the president of the ACP,

Francisco José Lloreda Mera.

Gas, leader in exploration:

The report highlights that investments in natural gas continue to gain greater importance in the exploration budget. For 2023, it is projected to be USD 740 million, which represents 60% of the total exploration budget. 77% of this year's investments would be onshore and the remaining USD 280 million offshore, which shows interest in the development of this resource. Thus, it is projected to drill an offshore well, continue evaluating the wells drilled in 2022, and advance preparatory activities for the drilling campaigns planned starting in 2024.

According to the study, the Caribbean region will continue to be the main recipient of exploratory investment in 2023 with USD 485 million. 58% of the investment in this area will be made offshore and the remainder onshore. Likewise, in the Caribbean, 61% of the investment focused on the search for natural gas will be executed.

“Investment in gas has been increasing for several years. It is a clear sign of the industry's interest in shifting towards primary energy sources that, in addition to being clean, are called to be the transmission belt of the transition,” said Lloreda.

Investment in production:

Total investment in production in 2023 is estimated at USD 3.810 billion, which means an increase of 61% compared to 2022 (USD 3.590 billion). These investments will be allocated
as follows: 52% to the drilling of development wells (to produce more oil and gas), 25% to production facilities, 12% to enhanced recovery projects, and 11% to other activities.

It is expected that oil production for 2023 will be 770 thousand barrels per day (bpd), 16 thousand bpd more compared to the average production of 2022; and in gas, a potential gas production of 1.183 million cubic feet per day (mpcd). The department of Meta will continue to be the main recipient of investment in production with USD 1.859 billion, followed by Casanare (USD 754 million), Arauca (USD 325 million), Santander (USD 143 million), Putumayo (USD 126 million); among other departments.

Impact of the tax reform:

According to the survey conducted among private regime companies affiliated with the ACP, the higher tax burden approved in the tax reform generated a cut in the 2023 investment budget of around USD 370 million: USD 170 million corresponds to a drop in exploratory investment and USD 200 million less in production investment.

“Some companies have found it necessary to reduce their investment budget in exploration and production to comply with the tax reform; which is unfortunate, as we are talking about very important resources that the country needs,” said the President of ACP.

Investment climate for 2023:

The E&P Investment Trends Report also presents the results of the investment climate survey, answered by 14 companies from the private sector, which analyzes the main strengths and weaknesses for investing in the country. Its main conclusions were:

• Strengths of the country for investing in E&P: an interesting prospectivity, the announced respect for existing contracts, and the support offered by the Government to move them forward, and favorable expectations for the natural gas supply in the coming years.
• Weaknesses for investing in E&P: tax changes that reduce the country's competitiveness, uncertainties related to public policy and gas - including the announcement of not signing new E&P contracts, and finally, the increasing risks regarding social conflict and security.

It is noteworthy that, for most companies, no aspect was rated as an improvement; on the contrary, 100% of respondents indicated that fiscal conditions worsened and that 79% of companies considered that regulatory and institutional security and political stability significantly deteriorated in 2022. Legal insecurity, increased taxes, and political stability are weaknesses.

“Public policy signals will be decisive in improving the investment climate in the sector. Therefore, we reiterate the willingness of the hydrocarbons industry to work jointly with the national Government, departments, and municipalities, and to continue contributing to the dynamism of local economies, job creation, and the social and environmental development of Colombia and its regions,” concluded the President of the ACP.

Final note: This report was prepared based on investment budgets and the perception of the investment environment for the industry, provided by companies that represent 96% of production and 82% of oil and gas exploration.