Colombia’s oil flow poised for recovery: Minister

Colombia is targeting a 5.4pc increase in oil production to 780,000 b/d -800,000 b/d in 2022, the same goal it missed last year.

Oil output averaged 740,000 b/d in January-November, Colombia's mines and energy minister Diego Mesa told Argus. Aside from the Covid-19 pandemic, last year's output was thwarted by a national strike and unrest that blocked roads and forced companies to shut in wells.

Natural gas output climbed to pre-pandemic levels of around 1.08bn cf/d through November, and output is expected to hit 1.1bn cf/d in 2022.

Colombia is pinning gas hopes on offshore blocks, where more exploration will get underway this year at Shell-operated Col-5 and Tayrona operated by Brazilian state-controlled Petrobras.

"We currently have 10 active contracts with pending investment of up to $3bn to execute. These contracts focus on the search for both new gas and oil reserves," said Mesa.

Since taking office in 2018, president Ivan Duque's administration has awarded 69 exploration and production contracts, including 30 blocks awarded late last year, surpassing a target of 50 contracts, Mesa said.

The ministry hopes 60 exploration wells will be drilled in 2022, up from 34 in January-November 2021.

A total of 112 upstream contracts will be in the exploration phase with agreed investments close to $4.11bn in 2022.

Election uncertainty

The oil industry is cautiously watching Colombia's presidential election campaign in which leftist frontrunner Gustavo Petro is advocating a halt on exploration contracts.

Mesa said investors should take solace in Colombia's stable legal conditions despite "some populist and irresponsible proposals from certain candidates."

Petro, a former Bogota mayor, is the favorite in a broad field of candidates for May 2022 elections to replace conservative incumbent Duque in August.

Centrist and rightwing candidates will be selected in March primary elections.

Oil is the main source of government revenue, bringing in about 20 trillion pesos per year ($5.3bn/yr). The oil sector, which represents 2.1pc of total GDP, accounts for 32pc of export revenue, Mesa says.

Referring to Petro's proposals, he said Colombia would struggle to "replace one third of direct foreign investment, 40pc of exports and 80pc of the collection of the general royalty system."

By Diana Delgado