Contents

Introduction

After two years of decline, oil production in Colombia should do better this year. The rise in oil prices, added to new regulation for the allocation of oil and gas areas and the entry into force of the tax reform approved at the end of 2016, should halt the downward trend. Expectations for gas production are similar.

However, this change of scenery doesn't alter the fundamental difficulties that afflict the Colombian hydrocarbons sector. Although investment growth is expected in 2018, the amount will continue to be lower than in 2015, when prices started to plunge. Factors such as the lack of regulation around prior consultation are threatening the continuity of several projects and, in the future, discourage new investment.

Colombia needs to reach agreements among all all the involved parties to encourage greater exploration. The country is running out of reserves: oil reserves cover 5.1 years, and gas, 11 years. In the last decade, investment in exploration and production allowed for replacement of reserves produced, but 80% of this replacement came from the reevaluation of discovered resources, and only 20% was the result of new finds.

In this report we look at production and investment in the hydrocarbons sector in Colombia. In addition, we will identify incentives that can boost investment, along with the obstacles to new activity. We also cover the outlook for shale and offshore.

Figure: Crude Production

Figure: Gas Production

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