We assume investors view royalties as a cost-of-doing business without regard to value judgements like positive or negative or, as the title suggests, kind or unkind. In fact, our heading for this quarter’s review of company financial results is a play on words. For a number of fields, the ANH changed the way royalties are collected (in kind versus in cash) and this changes results presentations for many companies.
A tumultuous month starts with a high-profile kidnapping, passes through suspension of talks with both ELN and alias Mordisco, but ends with everyone back at the table. In the middle, Petro finally realized what everyone in Colombia already knew: that Danilo Rueda was not the right person for High Peace Commissioner. Government Chief Negotiator for the ELN process, Otty Patiño now has the hot seat.
This question seems at the very least premature. While most Colombians (it appears but maybe not) are counting down the days (984 as of time of writing), oil and gas companies have long-term investments. Committing to them today means living with the consequences beyond August 6th, 2026. Who will be making the decisions on August 7th or, if “who” is too complicated, what kind of government will we have?
Just as we were about to write about the impact of taxes on Ecopetrol’s 3Q23 results, the Colombian Constitutional Court decides to undo the royalty no-deductibility rule from last December’s tax reform. Instead, we will briefly discuss the tax impact and then focus on ECP’s results, which got the press’s negative attention. Very happy to have to reorient this article in return for what we estimated as US$2B of less tax.
Long-time HCC contributor and industry veteran Tomás de la Calle sent this analysis and commentary on the Petro government’s energy policy. We think you will find it useful.
The recent local elections and major setbacks in President Gustavo Petro’s flagship “Total Peace” project should mean a reevaluation of the To Do list but probably it won’t. Unfortunately. Here we look at the election results in more depth.
The lightest peace news month in 2023 meant Colombians focused on other issues, specifically the regional elections that took place on the 29th of October. These could impact President Gustavo Petro’s ability to implement whatever agreements he manages to achieve. UPDATE: On Thursday, November 2, 2023 the High Peace Commissioner Danilo Rueda reported that the ELN were responsible for the kidnapping of Luis Manuel Diaz, father of Colombian international footballer Luis Diaz. This violates the spirit if not the letter of the peace talks (which Rueda’s social media post highlights) so for now we can only say that the impact on the process is unpredictable.
The last week or so was topsy-turvy for Colombian gas with Ecopetrol announcing “the presence of gas” in the Shell-operated Glaucus-1 well but Canacol announcing it had thrown-in-the-towel on its deal with EPM and the associated pipeline connecting Medellin and Jobo. The Canadian E&P simultaneously announced it was limiting its Colombian CAPEX to projects which leverage “existing transportation capacity” and focusing its future-oriented investments on Bolivia. The Canacol announcement will, no doubt, dominate the coffee and cocktail conversations at this week’s Cumbre de Petróleo, Gas y Energía in Cartagena.
This rather succinct but perhaps unpleasant phrase came from an unidentified French cabinet minister, quoted in a The Telegraph article on Great Britain’s broken infrastructure planning process. It seems Colombia’s peers also have great problems with prior consultation and no good solutions.
Time was when we could count on a negative correlation between oil prices and the Colombian peso that provided countercyclical relief. Not anymore.
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