News and AnalysIs for

Incidents were back down again this week to 43 but there were fresh direct attacks on pipelines. Our 4-week Moving Average was down slightly and it now sits at 52 incidents per week, back where it was in November last year and still down from a peak of 58 back in October.

As reported by internet news site Vox Populi, Orlando Cabrales, president of the ANH, said that Foreign Direct Investment (FDI) in the sector increased by between 28% and 30% in 2012 compared to 2011 figures. While in 2011 there was FDI of US$5B, in 2012, according to projections by Fedesarrollo and the Central Bank, the FDI was between US$6.4B and US$6.5.

The peace talks continue their somewhat strange rhythm with both sides smiling for the cameras and issuing upbeat communiqués but the Farc and the ELN returning to kidnapping and heinous civilian terrorism. The result is a dynamic where the President joins the Defense Minister in denouncing the acts, civil society hardens its views and yet the negotiators continue as if nothing were going on back home that might impact the talks.

Colombia ran a kind of controlled experiment from the 20th of November to the 20th of January when the Farc observed a unilateral ceasefire. During this time, oil and gas companies were largely free to produce and transport what they wanted, limited only by geology, normal production difficulties like equipment breakdowns, community activism and the National Environmental Licensing Agency (ANLA). These months from November to January were also the three highest production months in the history of Colombia. Was this a glimpse at the peace dividend and if so, we asked, what was it worth?

RCN Radio reports that in Meta department the resources from 2011 royalties were wasted. This was stated by the Comptroller General, who reported that in Puerto Gaitán US$13M was invested in aqueducts that currently do not work. In the report, the Comptroller said, “the fiscal findings are related to the uselessness, neglect, deterioration and lack of functioning of priority works for the community, that after their construction are not fulfilling the function for which they were planned” .

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.