News and AnalysIs for

A couple of weeks ago we published a variation of this graph based on the production guidance that Canacol published at that time. Canacol being Canacol the picture was not crystal clear and so we made some assumptions to fill in the blanks. Now with 4Q12 results, the picture is not perfect but it is clearer. The principal assumption that we made was that Ecuador would have what the company calls Non-Tariff production i.e. not Tariff which is their word for what amounts to an oil services contract to operate a well for a set fee per barrel. It is now clear that that is not the case and Ecuador will be only an oil services contract which the company says is higher margin than their Colombian contract.

Direct infrastructure attacks numbers eight and nine took place in southwest Putumayo. One was directly on the TransAndino pipeline and the other on the feeder pipeline that brings oil up from San Miguel/La Hormiga.

With the peace talks underway and the Farc trying to get a bi-lateral truce, the question has been how firm is President Santos in continuing to pursue military options. The Farc certainly have launched some very high profile attacks – twice against the TransAndino pipeline since January 20th. Would the desire for peace trump the need to maintain pressure on the guerrilla? Here is a Presidential press release from a speech to the troops on the line. Translated and with commentary by Hydrocarbons Colombia.

This is an article about coal and loading coal on ocean-going vessels by barge, neither of which are particularly relevant to the hydrocarbons industry. But we tweeted this when it happened (“Colombia environmental agency shows its teeth: shuts down second largest coal producer for accidentally dumping cargo in the sea.”) because it showed the economic consequences of violating the National Environmental Licensing Agency (ANLA) rules. Drummond is losing millions of dollars  because of the shutdown and because the country’s largest coal mine, Cerrejon is on strike, the country is losing significant royalty and tax revenues. It now seems that the ANLA’s actions were justified, the shut down might have been avoided and all companies should learn from the lesson. From an ANLA press release, translated and with commentary by Hydrocarbons Colombia

This chart is pretty simple but then Talisman has never really reported much data on its Colombian operations, relegating it to an “includes Colombia” comment under its international operations. But this has changed over the past five or six months since Hal Kvisle was appointed CEO. The country went from being one of the company’s assets with a “For Sale” sign around its neck to being not exactly core but certainly off the auction block and meriting its own chapter in Talisman’s recently published 4Q12 results.

National newspaper El Tiempo reports that the government’s agenda has been slowed due to prior consultations with ethnic minorities. The lack of clarity in the process has suspended the progress of the rural development law, Mining Code reform, section 3 of the Ruta del Sol highway and the CARs (regional autonomous environmental authorities) reform, among other projects, until minorities approve them.

We showed a version of this graph in our November Inner Circle Monthly report which shows the two most common global benchmars, WTI and Brent and the Average Realized Oil Price in Colombia, as measured by those operators which report pricing. The Unweighted Average lies almost perfectly between average WTI and average Brent. The production-weighted Average is heavily pulled by Ecopetrol and shows more variation. The dotted lines show our estimate of these values for 4Q12 and our (admittedly early-days) projection of the numbers for 1Q12.

Business newspaper Portafolio.co reports that according Luis Pacheco, Pacific Rubiales Planning vice president, the company could reach US$3.9B revenue in 2012; this after royalties and payments to partners. In this way the company would achieve a 14.7% increase over 2011 figures. Pacheco made these statements during the conference Colombia Genera, of the ANDI.

According to national radio station W Radio there is a tense work environment at the National Environmental Licensing Agency (ANLA) due to the pressure exerted by managers on technicians responsible for making environmental licenses studies. The radio station said it has documents that prove that legal and administrative employees of the ANLA modify the technical concepts of biologists, environmental engineers and forestry engineers to help companies obtain licenses more easily. The technicians say that non-technical employees are not authorized or qualified to make such changes. In addition, some technicians said there are managers asking them for 300 environmental concepts for wells in a 15 day period.

The USO is back protesting the creation of Cenit SAS, the Ecopetrol spinout that holds the state-owned oil company’s infrastructure assets. This would seem to be a train that left the station a long time ago but it does give the union a soapbox to preach from. In other news, the USO continues to target Ecopetrol contractors to get their workers back into the union fold.