Colombian Oil Production Slips Amid Deadly Protests
By Matthew Smith - Jun 03, 2021
Protests which erupted across Colombia in late April 2021 in response to proposed government tax hikes are now in their fifth week. There are indications that anti-government rallies will continue for some time after failed attempts at violent oppression, which has left 71 protestors dead with 36 at the hands of authorities, fuels further protests.
In response to the Duque administration’s heavy-handed attempts at repressing anti-government demonstrations, protestors have established roadblocks blockading many of Colombia’s main transport arteries. This is having a profound impact on the Andean country’s economically crucial oil industry which data from statistics agency DANE shows generated 17% of government revenues, 28% of exports by value, and 3% of gross domestic product during 2020. The importance of Colombia’s oil industry is underscored by the Duque administration’s focus on its reactivation after easing the restrictions imposed during the Andean country’s pandemic lockdown. These included providing tax relief to the hydrocarbon sector to bolster production and attract investment.
There are signs that those measures were failing to achieve the desired results. While forecast 2021 investment of up to $3.45 billion is substantially greater than the $2.05 billion made last year, it is still at least 14% lower than 2019’s $4.03 billion. The direness of the economic situation facing Bogota is underscored by the poor performance of Colombia’s economy and the struggle to reactivate many sectors which were irreparably damaged by the pandemic lockdown. DANE data (Spanish) shows that first quarter 2021 gross domestic product of $57 billion was a worrying 9% lower than the previous quarter.
An existing security crisis, anti-government protests and road blockades are impacting economic activity and the petroleum industry putting Colombia’s crucial economic recovery is at risk. The current political turmoil has seen fuel shortages emerge in many parts of Colombia further constraining economic activity and oil industry operations in the affected regions. The latest news for the fiscally and economically vital petroleum industry bodes poorly for Colombia’s oil-dependent economy.
Blockades are preventing oil companies operating from supplying their operations and transporting the crude oil produced by road to storage and port facilities. As a result, many drillers are being forced to turn off the spigots with onsite storage facilities brimming at capacity. The latest announcement is from Frontera Energy, Colombia’s third largest oil producer, which initially started its operations were unaffected, but this week revealed that it was forced to shut-in 3,600 barrels per day of production. This was because storage facilities at Frontera’s Llanos Basin CPE-6 Block in the department of Meta are full because roadblocks in the vicinity of Puerto Gaitan, a hotspot for anti-oil industry activity. Prior to the protests commencing Colombia’s peak oil industry body the Colombian Petroleum Association (ACP – Spanish initials) released a statement condemning multiple oilfield invasions in Puerto Gaitan. The latest tensions in the area highlight that the petroleum industry’s local social license is further deteriorating.
Chilean energy company Geopark, which closed the Colombian Amerisur Resources deal in January 2020 to become Colombia’s fourth-largest oil producer, also released an update to its operations earlier this month. The company which last month announced the shut-in of up to 15,000 barrels of oil output per day stated it was in the process of bringing operations in the Llanos Basin back online. That sees net production curtailments at around 4,000 to 5,000 barrels per day, a significant reduction from the earlier production shut-ins. Beaten down Gran Tierra Energy, Colombia’s fifth largest oil producer has yet to provide an update after revealing last month it had shut-in 5,250 barrels per day of production because of roadblocks. Parex Resources, Colombia’s largest private oil producer, has yet to disclose the impact of the political turmoil on its operations but during mid-May 2021 advised it was withdrawing its second quarter 2021 guidance.
Colombia’s national oil company Ecopetrol, which is 88.5% owned by the state, after initially claiming to be unaffected, announced late last month that production was down nearly 4% and refinery throughput had fallen. Ecopetrol subsidiary Cenit, which owns and operates most of Colombia’s oil pipelines, was forced to intermittently suspend operations because of the buildup of crude oil at various transportation and pipeline hubs. That according to Cenit caused refined and crude oil transportation volumes to fall sharply during May 2021.
Related: ''We'll See $200 Oil": Russia & OPEC Ministers Blast IEA's Net Zero Plan
These latest developments do not bode well for Colombia’s hydrocarbon output, which the energy ministry announced (Spanish) for April 2021 was an alarming 6.3% lower than for the same month in 2020 when Colombia’s pandemic lockdown was in full effect. That sharp decline in crude oil output occurred before the full impact of the anti-government protests in Colombia was being felt by the strife-torn country’s petroleum industry. There is further pain ahead for the Andean country’s crisis-stricken oil industry and its fragile petroleum-dependent economy. If production keeps deteriorating for a sustained period, it could precipitate a financial crisis for an already cash-strapped Bogota which in January 2021 issued over $2.8 billion in sovereign debt.
Collapsing fiscal income because of weaker economic activity and declining oil output combined with increased spending is expected to cause the 2021 budget deficit to blow out to a record 9% of GDP. Even Duque’s proposed tax reform, which was intended to generate around 2.2% of GDP in additional revenue, would have done little to save an economy suffering from weak oil prices and the considerable fallout from the pandemic. Recent events underscore the volatile operating environment for Colombia’s oil industry. The ongoing turmoil will further impact operations and confidence, deterring much-needed development to expand Colombia’s meager oil reserves and waning production.
By Matthew Smith for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Colombi...tests.html
By Matthew Smith - Jun 03, 2021
Protests which erupted across Colombia in late April 2021 in response to proposed government tax hikes are now in their fifth week. There are indications that anti-government rallies will continue for some time after failed attempts at violent oppression, which has left 71 protestors dead with 36 at the hands of authorities, fuels further protests.
In response to the Duque administration’s heavy-handed attempts at repressing anti-government demonstrations, protestors have established roadblocks blockading many of Colombia’s main transport arteries. This is having a profound impact on the Andean country’s economically crucial oil industry which data from statistics agency DANE shows generated 17% of government revenues, 28% of exports by value, and 3% of gross domestic product during 2020. The importance of Colombia’s oil industry is underscored by the Duque administration’s focus on its reactivation after easing the restrictions imposed during the Andean country’s pandemic lockdown. These included providing tax relief to the hydrocarbon sector to bolster production and attract investment.
There are signs that those measures were failing to achieve the desired results. While forecast 2021 investment of up to $3.45 billion is substantially greater than the $2.05 billion made last year, it is still at least 14% lower than 2019’s $4.03 billion. The direness of the economic situation facing Bogota is underscored by the poor performance of Colombia’s economy and the struggle to reactivate many sectors which were irreparably damaged by the pandemic lockdown. DANE data (Spanish) shows that first quarter 2021 gross domestic product of $57 billion was a worrying 9% lower than the previous quarter.
An existing security crisis, anti-government protests and road blockades are impacting economic activity and the petroleum industry putting Colombia’s crucial economic recovery is at risk. The current political turmoil has seen fuel shortages emerge in many parts of Colombia further constraining economic activity and oil industry operations in the affected regions. The latest news for the fiscally and economically vital petroleum industry bodes poorly for Colombia’s oil-dependent economy.
Blockades are preventing oil companies operating from supplying their operations and transporting the crude oil produced by road to storage and port facilities. As a result, many drillers are being forced to turn off the spigots with onsite storage facilities brimming at capacity. The latest announcement is from Frontera Energy, Colombia’s third largest oil producer, which initially started its operations were unaffected, but this week revealed that it was forced to shut-in 3,600 barrels per day of production. This was because storage facilities at Frontera’s Llanos Basin CPE-6 Block in the department of Meta are full because roadblocks in the vicinity of Puerto Gaitan, a hotspot for anti-oil industry activity. Prior to the protests commencing Colombia’s peak oil industry body the Colombian Petroleum Association (ACP – Spanish initials) released a statement condemning multiple oilfield invasions in Puerto Gaitan. The latest tensions in the area highlight that the petroleum industry’s local social license is further deteriorating.
Chilean energy company Geopark, which closed the Colombian Amerisur Resources deal in January 2020 to become Colombia’s fourth-largest oil producer, also released an update to its operations earlier this month. The company which last month announced the shut-in of up to 15,000 barrels of oil output per day stated it was in the process of bringing operations in the Llanos Basin back online. That sees net production curtailments at around 4,000 to 5,000 barrels per day, a significant reduction from the earlier production shut-ins. Beaten down Gran Tierra Energy, Colombia’s fifth largest oil producer has yet to provide an update after revealing last month it had shut-in 5,250 barrels per day of production because of roadblocks. Parex Resources, Colombia’s largest private oil producer, has yet to disclose the impact of the political turmoil on its operations but during mid-May 2021 advised it was withdrawing its second quarter 2021 guidance.
Colombia’s national oil company Ecopetrol, which is 88.5% owned by the state, after initially claiming to be unaffected, announced late last month that production was down nearly 4% and refinery throughput had fallen. Ecopetrol subsidiary Cenit, which owns and operates most of Colombia’s oil pipelines, was forced to intermittently suspend operations because of the buildup of crude oil at various transportation and pipeline hubs. That according to Cenit caused refined and crude oil transportation volumes to fall sharply during May 2021.
Related: ''We'll See $200 Oil": Russia & OPEC Ministers Blast IEA's Net Zero Plan
These latest developments do not bode well for Colombia’s hydrocarbon output, which the energy ministry announced (Spanish) for April 2021 was an alarming 6.3% lower than for the same month in 2020 when Colombia’s pandemic lockdown was in full effect. That sharp decline in crude oil output occurred before the full impact of the anti-government protests in Colombia was being felt by the strife-torn country’s petroleum industry. There is further pain ahead for the Andean country’s crisis-stricken oil industry and its fragile petroleum-dependent economy. If production keeps deteriorating for a sustained period, it could precipitate a financial crisis for an already cash-strapped Bogota which in January 2021 issued over $2.8 billion in sovereign debt.
Collapsing fiscal income because of weaker economic activity and declining oil output combined with increased spending is expected to cause the 2021 budget deficit to blow out to a record 9% of GDP. Even Duque’s proposed tax reform, which was intended to generate around 2.2% of GDP in additional revenue, would have done little to save an economy suffering from weak oil prices and the considerable fallout from the pandemic. Recent events underscore the volatile operating environment for Colombia’s oil industry. The ongoing turmoil will further impact operations and confidence, deterring much-needed development to expand Colombia’s meager oil reserves and waning production.
By Matthew Smith for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Colombi...tests.html
