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The Colombian Petroleum Association (ACP)

Colombia’s Petroleum Sector Bullish On Exploration & Production In 2021

Posted On January 29, 2021
By : Loren Moss
Comment: 0
Tag: 2021, ACP, antioquia, asociacion colombiana de petroleo, caribe, casanare, colombia, colombian petroleum association, Córdoba, e and p, e&P, energy transition, exploration & production, exploratory drilling, francisco jose lloreda mera, francisco lloreda, gas, huila, jose lloreda, meta, natural gas, norte de santander, offshore, oil, pacho lloreda, petroleum, putumayo, santander, unconventionals, ync

The Colombian Petroleum Association (ACP) presented its most recent economic report, “E&P Investment Trends in Colombia 2020 and Outlook 2021,” which projects for 2021 an investment in oil and gas exploration and production (E&P) between $3.1 and $3.45 billion USD, 51% higher than that of 2020, an atypical year due to the Covid-19 pandemic and the fall in international oil prices. However, the industry association cautions that this investment is still close to $300 million USD lower than investment registered between 2015 and 2019.

The report, prepared based on the preliminary planning and budgets of oil companies surveyed by ACP, shows the growing interest in natural gas by companies. For 2021, 45% of the total exploration budget will be focused on the search for gas, with a projected $400 million USD to develop gas production, representing 15% of the total investment in production.

“A rebound in investment in the sector is good news for the country, since not only the oil and gas industry guarantees the generation of fiscal resources that allow the nation and the regions to leverage public investment in strategic projects for economic and social reactivation, but also guarantees the self-sufficiency of the country, which will require energy for its industrial reactivation,” said the president of the ACP, Francisco José Lloreda Mera.

Exploratory investment will be concentrated in Colombia’s Caribbean region; while investment in production will go mainly to the Meta, Santander & Norte de Santander departments.

At the regional level, exploratory investment will be concentrated in the Caribbean region, primarily in Córdoba, and mostly on the mainland, where a significant part of the resources will focus on the search for natural gas. On the other hand, investment in production will be directed mainly to the department of Meta, which will continue to be the primary recipient of investment, followed by the Santander, Norte de Santander, Casanare, Antioquia, Putumayo and Huila departments.

“Natural gas is gaining strength in the energy matrix, so it is not surprising that its share has been growing in recent years. Colombia has geological potential, but for it to develop it is necessary to promote the growth of its demand, which implies measures that facilitate timely marketing, competitive transportation to consumption centers and promote competition under equal conditions. This will be key to promoting the growth of this energy in the country, the supply and the reliability that is required in an energy transition process,” explained Lloreda.

President of the ACP, Francisco José Lloreda Mera

President of the ACP, Francisco José Lloreda Mera

Finally, the report highlights that 95% of the investments in 2021 will be carried out on land, while in offshore and unconventional fields (YNC) the investments will be aimed at developing studies and other activities prior to exploratory drilling, which is forecast for 2022.

Investment climate

The report also presented the results of the survey on the country’s investment climate, which assesses several fundamental aspects for the sector: prospectivity, competitiveness of goods and services, fiscal aspects, availability of infrastructure, contractual, environmental and social aspects, political stability, regulatory security, prior consultation and security in operations.

This year, the overall rating averaged 5, placing it in the acceptable range, registering a decrease compared to that granted in 2019 (6 / good). Of the 11 elements evaluated, only one totally favorable perception of the country remains, which continued to be Political Stability, which improved from 63% and 65% in 2018 and 2019, respectively, to 75% in 2020.

The perception of Prospectivity (The quality of being or having a likely location in which to prospect for minerals), which had always been a strength of the country, is now seen mostly as neutral or indifferent. In the remainder of the aspects evaluated, a perception classified between neutral and weak continues to prevail.
“The responses of the surveyed companies invite us to continue working, in conjunction with the Government, on the structural issues that need to be improved to regain interest in investing in Colombia. It is necessary to promote the growth of the natural gas market, reduce oil pipeline rates, have greater regulatory security, review contractual issues, optimize environmental licensing processes, among other aspects that are fundamental for the country to attract investment, develop its potential in oil and gas and generate the necessary resources to mark the economic and social reactivation,” concluded Lloreda.

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About the Author
Loren Moss is the founder and publisher of Finance Colombia. He has over 20 years of international business experience, including over a decade of experience in securities, insurance, and commercial real estate, at the institutional and international level.
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