News and AnalysIs for

Radio Nacional de Colombia reports that according to the Colombian Petroleum Association (ACP), foreign investment will decline despite the country’s reserves increasing this year. Oil industry representatives said that “with the drilling of 135 new wells, the oil industry hopes to increase hydrocarbon reserves, currently estimated at 2,200 million barrels,” adding that “findings such as those achieved by Canacol in January 2012, in the Magdalena River middle valley with a daily production of 1,242 barrels per day, reinforces the official forecasts that the country could reach 41,000 million barrels in 2030.”

Gran Tierra recently issued a press release on its reserves for year-end 2012. The good news is that the company’s Colombian oil reserves 2P (Proved and Probable) are up 34% over 2011. Proved (P1) reserves are up 22% and Probable (P2) are up 85%. The bad news is that Colombian 2P gas reserves are down 64% although Proved gas reserves are only down 35%. Gas now represents only 5% of the company’s Colombian 2P reserves. Argentina gas reserves have also declined but the growth in oil in Colombia, Argentina and Brazil is sufficient to push 1P reserves up 20% and 2P reserves 15% on a total company basis. The official long-form filing may not appear until the end of this month and the company gave no explanation of the decline in gas reserves in its press release.

Portafolio.co reports that, according to a study by Central Bank, despite the last 20 years’ worth of investment, exploration and successful drilling, it has not been possible to find oil fields with reserves as large as those of the Cupiagua (Casanare), Cusiana (Llanos) or Caño Limón (Arauca).

We have not published these statistics from Campetrol for a while and they are somewhat old considering all the evidence of drilling activity in 4Q12. They do indicate where the action is and the Free / Contract statistics are evidence of availability for those who need equipment (for glass half full types) or perhaps lack of activity (for glass half empty types). Utilization was at 70% in October 2012 versus 83% in November 2011. (Note that our numbers vary somewhat from Campetrol’s figures. See the Methodological Note at the bottom of the article.)

Ecopetrol had its last board meeting of the year on Sunday December 16th which approved the capital expenditure (CAPEX) budget for 2013. The company will invest over US$9.5B or about the equivalent of a quarter’s worth of revenue across all its varied businesses. The ‘mother ship’ will get about 70% of all CAPEX although this varies considerably across the various business units. We found it surprising that investments outside Colombia will get 11% of total Exploration and Production investment (US$654M) even though today, these represent only about 1% of current production.

National business magazine Dinero has finally recognized the challenges facing the industry. The article points out that while the oil industry is one of the strongest in the country, there has been no major oil discovery recently, terrorist attacks on pipelines continue, there are delays with the environmental licensing (as we recently reported) and strikes and shut-ins in the oil fields.

With so much doom and gloom around the Colombian hydrocarbons industry it’s nice to celebrate some good news. The graph shows MinMinas reported gross production (before royalties and working interest) the Las Maracas field and Petroamerica’s recently reported November figure. Production is up over 500% since July.

National business newspaper Portafolio reports that in 2013, the National Hydrocarbons Agency (ANH) will invest US$153.4M in subsurface studies in many areas of the country. The ANH will do this investment with the purpose of provide subsurface information to prospective investors, since in 2012 Round some companies chose not to invest in certain areas due to lack of geological knowledge.

In a press release, Sintana Energy announces a farm-out arrangement with ExxonMobile Exploration Colombia. The farm-out is for block VMM-37 in the Middle Magdalena Basin but only applies to unconventional plays on the block. For these ExxonMobile will earn a 70% interest on completion of the agreed work plan. Sintana retains 30% of an unconventional play and 100% of conventional production.

A few weeks ago Baker Hughes pinned part of the blame on Colombia for a slowdown in Latin American rig activity. Today Tuscany Drilling gave its 3Q12 results and the story was consistent although more nuanced and ended on a more positive note.