Politics and pragmatism rarely mix Politics and pragmatism rarely mix, and it seems that Colombia’s new president will be no exception to that rule. However, politicians are renowned for their ability to dream, and in the long term, that may be just as valuable. The fact of the matter is that Colombia is already on a gradual de-escalation of economic dependence on oil. The country has gone a long time with no significant increases in proven resources, essentially since 2012. Crude resources totaled 2 billion barrels in 2021 and crude production has been on a steady decline since 2013, with the nation producing an average of below 750,000 barrels per day (bpd) in 2021, a 6% drop year on year from 2020, with production levels this year expected to mirror 2021. Natural gas production is also in dire straits. Although Colombia was able to produce 6% more natural gas in 2021 than in 2020 in the short to medium term the country will experience a natural gas deficit, where domestic demand is higher than domestic production. By the end of Petro’s presidency it is forecasted that the Andean nation will need to import 1.74 billion cm of LNG to meet demand. As there are no long-term LNG contracts in place to speak of, the Colombians will have to buy from the spot market. In today’s world that is an expensive proposition. Renewable energy is something that Colombia can and should develop, taking into consideration the inexorable drift the country finds itself in. When thinking about energy security into the 2030s and 2040s it is not sufficient to depend on LNG imports to fuel the gas to power sector, and industry will benefit from knowing that there is stable and constant power available that is being produced domestically. However, that reality is still over the horizon and legislation and investments made now most probably will not bear fruit in a four-year term. So, as it is, Petro may just be embracing the inevitable, although as with any experiment there should be a control and a variable. It looks like his presidency will be mostly variable and little control considering the makeup of the Congress and the long-term nature of the energy transition as such. All the best, Houston,USA June 30, 2022 | | | | W. Schreiner Parker Senior Vice President and Head of Latin America
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| | Rystad Energy - Your Energy Knowledge House Independent energy research and business intelligence company providing data, analytics and consultancy services to clients exposed to the energy industry across the globe. >> Read More | | Rystad Energy InsightsSubscription If you are not yet a subscriber to our insights and newsletters and want to get monthly updates, please fill out the Newsletter Subscription Form. | | | | South America takes exploration crown as discovered volumes stack up South America looks set to remain a global exploration hot spot for the next two years, driven primarily by activity in Brazil, Guyana, Suriname and Colombia. The region has seen a recovery in activity this year following the recent slump as the Covid-19 pandemic took hold from early 2020 and sent oil demand and prices tumbling. An increase in the offshore well count in the region is expected to be led by Guyana, followed by Brazil and Colombia, while onshore exploration, which has taken a back seat in the past two years, is on track for a comeback this year and next. Discoveries and potential Looking at the period from 2017 to the year to date, South America takes top spot among all continents in terms of discovered hydrocarbons. This is mainly attributed to Guyana, which takes top spot in the region due to the plethora of finds on the prolific ExxonMobil-operated Stabroek Block. The region has seen close to 14.5 billion barrels of discovered resources in the given period, of which Guyana accounts for 65%, followed by Suriname with 15%. The Guyana-Suriname Basin continues to be an exploration hot spot in the region having taken center stage since the breakthrough 2015 Liza discovery on Stabroek, which de-risked the basin. Since 2021, 86% of all the discovered resources in the region lie in Guyana and Suriname. Some of the major discoveries in the region during the period include the Whiptail, Cataback and Pinktail finds on Stabroek, which together added 1 billion barrels of reserves. Other major discoveries in the region in 2021 were Keskesi East, discovered by TotalEnergies off Suriname, and the Urissane discovery made by Petrobras off Brazil. In less than six month of 2022, the region has already discovered volumes close to the total unearthed during the whole of 2021. Major discoveries during the year have again come from Stabroek, which added 1 billion barrels of resources, and from TotalEnergies’ Block 58 across the border in Suriname, adding 250 million barrels. Petrobras earlier this year drilled three wells in Brazil’s pre-salt polygon. The state-owned giant announced the presence of hydrocarbons at its Curacao well drilled on its Aram Block in the pre-salt Santos Basin and announced an oil discovery at its Alto de Cabo Frio Central Noroeste well on its Alto de Cabo Frio Central Block in the pre-salt Campos Basin. Petrobras plans to drill appraisal wells at both these finds later in the year. | | Colombia's new left-wing government could signal changes for O&G sector Politician and former rebel Gustavo Petro won Colombia’s presidential election earlier this June in a milestone victory that will see him lead the nation’s first-ever left-wing government. Colombia’s new president-elect has a stated aim to halt hydrocarbon development and shift the nation away from fossil fuels over the medium term. But any such move would have significant impacts on Colombia’s oil and gas industry, which is a major revenue generator for the economy, representing 12% of gross domestic product (GDP) last year. Will Petro end up being true to his word and follow the path of other left-wing governments in Latin America that have introduced legislation to halt new licensing rounds or committed to increasing the regional presence of NOCs at the expense of international investments? With crude production falling in Colombia and no new finds since 2012, regional explorers were holding out high hopes for the country’s recent licensing round. Colombia’s crude resources totaled 2 billion barrels in 2021, with no significant increases in proven resources since 2012. Crude production has been on a steady decline since 2013, with the nation producing an average 735,000 barrels per day (bpd) in 2021, some 6% lower than in 2020, with production levels this year expected to mirror 2021. By contrast, commercial gas production is set to show a 6% recovery compared to last year, though a decline is anticipated over the long-term unless there is a sizeable uptick in gas field investments. At current production rates, the country will be able to sustain its crude output for only another six to seven years. Gas reserves have also fallen, reaching 3,164 billion cubic feet (Bcf) currently and are projected to last approximately eight years. | | Major OFS companies await easing of US sanctions on Venezuela On 27 May 2022, the US Treasury’s Office of Foreign Assets Control (OFAC) issued an eighth extension of Venezuela General License 8 which allows Chevron to continue working with national oil company Petróleos de Venezuela (PdVSA) and maintain assets in the South American country which would otherwise be prohibited by sanctions. It follows a long list of restrictions on Venezuelan individuals and companies linked to the Maduro regime which was initiated in 2015 by former US President Obama’s administration and escalated in 2017 by previous US President Donald Trump’s officials. Less well publicized is that Chevron’s license includes four major oilfield service (OFS) companies: Schlumberger, Halliburton, Baker Hughes and Weatherford. With vast heavy oil resources, Venezuela is a future growth option for these suppliers, meaning it is worth the cost of maintaining operations in the South American nation while the US government searches the globe for opportunities to expand crude oil supplies. Prior to the 2015 sanctions, the Venezuelan market for seismic, drilling and well services was worth around $7 billion, roughly equivalent to that of Argentina, another South American country with significant onshore resources. Since that time, the two nations have diverged substantially, with Venezuelan spending on these services dipping below $1 billion in 2021 and projected to recover only slightly in 2022. The Argentinian service market is now four times as large, in part due to the success of the Vaca Muerta shale play but also heavily influenced by a lack of foreign capital and expertise. In contrast to Russia’s less complex conventional onshore resources which can be produced with limited investments and local knowledge, Venezuela is more dependent on the capital and know-how of international companies to develop its heavy oil resources. US sanctions have significantly curtailed PdVSA’s plans to expand production. | | Uruguay dishes out offshore blocks in quest to finally unlock frontier riches Uruguay has set off in its latest quest to unlock hydrocarbons in underexplored basins with the award of offshore blocks to industry giants Shell and APA Corporation. The South American nation is hoping to replicate the success seen with frontier exploration elsewhere on the continent, such as the raft of discoveries offshore Guyana and Suriname. Uruguay has so far failed to unearth commercial discoveries at home and imports all its crude and natural gas, meaning the focus will be on drilling campaigns that result from last week’s block awards. Uruguayan oil refining and fuel distribution company Ancap on 24 June announced the award of a trio of offshore exploration blocks, with Anglo-Dutch major Shell picking up blocks OFF-2 and OFF-7, while US independent APA won Block OFF-6. Around 90% of OFF-2 lies within the Punta del Este Basin, with the remainder extending into the Pelotas Basin. The other two tracts lie within the Oriental del Plata Basin. The block awards follow on from the successful completion of the Surinamese shallow-water lease round, which saw majors Chevron and TotalEnergies as well as Middle Eastern giant QatarEnergy snap up acreage. | | Our articles and commentaries The above are samples and extracts from the full commentaries we offer in our Client Portal, which is part of our comprehensive energy intelligence offering. You may also find relevant content of interest in our press releases, freely accessible here. | | | |
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