Investment in E&P in 2020 would grow 23% in Colombia, according to ACP trends report

The Colombian Petroleum Association (ACP) presented the latest Investment Trends Report in Exploration and Production (E&P) in Colombia 2019 and Outlook 2020, which consolidates information from 26 companies that represent 94.1% of production in Colombia and 81.1% of exploration. According to the publication, for 2020, investment in E&P is projected at USD 4.970 billion, which is 23.1% higher than that recorded during 2019.

• Investment in exploration for this year will be 181% higher than that of 2019, while in production it will represent a 251% increase compared to the previous year.
• The increase in the projected exploratory investment in projects with gas potential is highlighted.
• The investment climate was rated between acceptable and good. Political stability, geological prospectivity, and contractual aspects were the best-rated variables.

Specifically, investment in exploration will be between USD 920 and 1,000 million, 181% higher than that recorded in 2019. Projections indicate that a little over 70% of these resources will be allocated to investments onshore and the remainder to offshore. On the other hand, it is estimated that investment in production in 2020 will be around USD 4,050 million, that is, 251% higher than that of 2019. 53% of the resources will go to development well drilling, 15% to enhanced recovery, which today contributes 19% of the country's production; and the remainder will be allocated to production facilities and others.

For this year, the increase in projections for exploratory investment in projects with gas potential is also highlighted, which will be USD 300 million, a little more than one-third of the total budget; as well as the resources allocated to develop natural gas production (USD 340 million), equivalent to 81% of the total investment in production.

“In order to materialize these investment projections, it is important for Colombia to maintain political stability, continue advancing in contractual and fiscal aspects, work on improving the surrounding conditions, and reduce processing times and transportation costs. This will allow us to catch up with other countries that are currently taking the lead, as while investment in E&P in Colombia fell in 2019, international projections estimate that it grew approximately 41% in the rest of the world,” expressed Francisco José Lloreda Mera, president of the ACP.

Although investment in oil and gas exploration and production in Colombia decreased 71% compared to 2018 and reversed the trend of two consecutive years of growth (2017-2018), greater efficiencies in operations allowed for an increase and maintenance of production in 2019.

For 2020, the ACP estimates that average crude oil production will be around 890 thousand barrels per day (+11% vs. 2019) and marketed gas production at nearly 1,090 million cubic feet per day (190 thousand barrels of oil equivalent). By regions, 90% of the investment in production will be executed in the basins of the Eastern Llanos, the Middle Magdalena Valley, and Caguán – Putumayo.

“Companies are focusing their investment efforts on maintaining production at the levels we had in 2019, avoiding the natural decline of the fields. If these investments were not made, the report indicates that crude oil production would fall to values close to 730 thousand barrels this year, hence the importance of continuing to drive the dynamism of the sector, overcoming internal obstacles, and being more competitive compared to the behavior and conditions of the industry in the rest of the world,” emphasized Lloreda Mera.

Investment climate

The Investment Trends Report in Exploration and Production (E&P) in Colombia 2019 and Perspectives 2020 also consolidates the opinion of companies regarding the investment climate in the country, which for this edition was rated between acceptable and good.

The political stability of the country continues to be the greatest strength for investing in Colombia, even more so compared to the instability situations observed in other Latin American countries. However, the strikes and protests at the end of 2019 cause a certain level of uncertainty.

Geological prospectivity remains the second greatest strength, and there is also an improvement in the perception of contractual issues. On the other hand, environmental, social, and security aspects remain the biggest challenges on the surface to attract investment.

According to the report's results, it is highlighted as a priority to continue the joint work between the Government, the industry, and the communities to enable operations in the regions, advance in contractual modifications and area allocation to encourage new investments, boost the growth of the gas market, among others.