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Colombia Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 530
The latest Colombia Oil & Gas Report from BMI highlights the opportunities and risks as the country's hydrocarbons sector enjoys rising production and investment levels.
BMI forecasts oil production continuing its recent upward trend, rising from 792,630 barrels per day (b/d) in 2010 to 1.22mn b/d in 2015. Risk is to the upside, particularly if security continues to improve and new infrastructure projects continue to ease production bottlenecks in the Llanos Basin. Production expansion is forecast to outpace consumption growth, meaning the country will see rising exports, which we expect to continue departing primarily to the US market. By 2015 we forecast consumption will be around 331,000b/d, implying exports of around 888,000b/d.
While the bulk of investment is flowing into the expansion oil production, gas output is also expected to grow, albeit at a modest rate. We forecast production rising from 10.5bn cubic metres (bcm) in 2010 to around 12bcm by 2015. Over the same period gas consumption is expected to rise from 8.99bcm to around 10.42 bcm. We expect small-scale gas export to continue across the border into western Venezuela in the coming years, although flows will be temporarily reversed to meet seasonal peaks in demand.
Over the long term, BMI forecasts oil production continuing to rise to a peak of 1.45mn b/d in 2018 before production could start to slip and fall back to around 1.37mn b/d in 2020. If, however, exploration expands beyond the core producing regions and investment continues to rise, supply could continue to increase. Consumption is expected to continue its steady rise, hitting about 375,000b/d in 2020, a relatively modest amount that will mean that Colombia remains an important exporter. Oil exports are forecast to top 1mn b/d by 2017. Gas production is expected to rise from 12bcm to 15bcm between 2015 and 2020, while consumption is expected to remain in the 11-12bcm range, leaving capacity available for export. What shape those exports will take, however, remains an open question. Long-term plans envision the Colombia-Venezuela gas pipeline being reversed as Venezuela ramps up its own gas production.
Investment is being led by state-run Ecopetrol and a range of independents led by Canada's Pacific Rubiales, which operates the country's largest field. Ecopetrol plans to invest US$80.4bn between 2011 and 2020.
Global GDP growth in 2011 is forecast at 3.2%, down from 4.3% in 2010. Growth in the eurozone should be marginally higher than 2010, while US and Chinese economic expansion will slow and Japan's growth will be negative, reflecting the devastating earthquake and tsunami in March 2011. Our oil price assumption for 2011 is US$101.90/bbl for the OPEC basket, falling to US$97.50/bbl in 2012; US$106/bbl for Brent in 2011 falling to US$101.50/bbl in 2012; and US$95.30/bbl for WTI in 2011 falling to US$94.50/bbl in 2012.
Colombia ranks second in BMI's composite Business Environment (BE) rating table for Latin America, which combines upstream and downstream scores. This reflects the country's virtual tie with Brazil for first place in our updated upstream Business Environment ratings. This strong showing reflects rising production levels, favourable licensing terms and an improved fiscal regime. Colombia does not fare as well in BMI's downstream Business Environment ratings, where it sits in fifth place, reflecting its relatively small refining capacity and moderate demand growth.
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