Like anyone in the oil industry, suppliers to oil services companies are feeling the impact of cost cutting and the fall in the price of oil, and in some cases, are feeling it even worse.
In an apparent effort to avoid a truckers strike and ward off critics of its fuel pricing policy, the central government made a surprise announcement to cut both diesel and gasoline prices by CoP$300 (US$0.12), bringing gasoline to its lowest level in almost five years.
Despite the fall in oil prices companies must not simply “discard workers” and cut “the more fragile half” of the business to reduce costs says the Labor Minister Luis (Lucho) Eduardo Garzón.
Incident counts went up again this week (to 38) but that was due to increased Armed Forces activity. As the graph shows, our proxy for guerrilla-initiated activity went down.
Ecopetrol (NYSE:EC) has deeply cut its 2015 Capex and wants to reduce its operational costs by 30% as well, but it will still destine US$200M to offshore development and drilling.
The reaction to the oil price crisis has serious implications for the estimated 120,000 workers in Colombia’s industry, and has received a countering reaction from some of the industry’s most prevalent unions.
The ink is barely dry on the most recent tax reform, and already analysts are suggesting the government will have to take further measures to address the budget deficit in 2016 due to the drop in oil prices.
Ecopetrol has secured a US$1.925B load to focus on its 2015 investment on pipeline development and developing production in its aging fields, while some are questioning the reason if not the need.
The rhetoric aimed at the Colombian Petroleum Institute (ICP) intensified this week with the union responding to accusations from the institute director that it is responsible for sabotage inside the facility.
Royalty spending could be cut by 30-40% due to the fall in prices, while the government insists they have a plan. Meanwhile the impact of the price fall is being felt in producing regions as warnings and speculation grows on job losses. These and other stories in this week’s summary of the impact of the fall in the price of oil.
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