THE GOVERNMENT TRUST IN THE LIFEGUARD OF HYDROCARBONS
Bogota June 25, 2021 - 02:00 PM THE GOVERNMENT TRUST IN THE LIFEGUARD OF HYDROCARBONS Oil: barrel at $ 75 but production does not pick up The New Century Archive Drafting Economy
THE RISE in oil prices in recent days is important for Colombia, since oil export earnings are seen as one of the most immediate lifesavers in the difficult task of containing the growth of the fiscal deficit due to higher spending. public in the contingency plan against the pandemic.
A high oil price is key not only because it increases Ecopetrol's transfers to the nation (which owns 87% of the company) but also because of higher income from taxes, foreign exchange and royalties.
As is known, there are different calculations of what the country receives for each dollar that, on average and for permanent periods, increases a barrel of crude oil. For analysts at the Ministry of Finance, this figure may be close to 130 million dollars, but estimates from private economic research centers speak of an amount around 96 million dollars . In any case, they are very important sums.
Beyond this discussion, the truth is that yesterday the prices of a barrel of crude ended up slightly in the United States due to signs favorable to demand in that country, in a context of contained world supply.
Thus, a barrel of Brent from the North Sea (the benchmark for Colombia) to be delivered in August ended at $ 75.56 in London, up 0.49% on Wednesday's close.
Meanwhile, in New York, a barrel of WTI for the same delivery gained 0.30% to 73.30 dollars.
It should not be forgotten that Brent and WTI reached their highest prices since October 2018 on Wednesday, at 76.02 and 74.25 dollars a barrel respectively.
"A sharp reduction in US stocks of crude oil and gasoline reinforced the sentiment of a rapid revival in demand," explained Avtar Sandu of Phillip Futures.
As is known, commercial crude oil reserves in the United States fell for the fifth consecutive week, more than expected by the market, amid an increase in the rate of refining in the country, according to data on Wednesday.
According to the weekly report by the US Energy Information Agency (EIA), crude reserves fell 7.6 million barrels to 459.1 as of June 18. Analysts expected a 3.5 million barrel drop.
Gasoline stocks fell 2.9 million barrels on their side, when the market expected a rise.
Government caution.
As said, having a barrel of crude above $ 75 is key for the country's finances, since the recently presented Medium-Term Fiscal Framework contemplates an average value of a barrel of $ 63.
Already last Sunday, in an interview with EL NUEVO SIGLO, the Minister of Finance, Jos Manuel Restrepo, indicated regarding the increase in the price of crude oil , that the Government was being conservative in the forecasts and estimates of additional income for this concept.
"This is the case of oil, where we first recognize that, just as the average for 2020 was of the order of 43 dollars, the average that we are talking about this time is 63 dollars and we hold it for 2022. If values are given by Above that average, it will be for the benefit of this Medium-Term Fiscal Framework and it will be unexpected gains that could occur in the course of it, but we have tried to be very conservative in these forecasts, explained the finance czar.
He added that the force of events shows that we are doing well, that the average for these first months of the year is 64 dollars a barrel. Of course, if it is temporarily above it, it helps us in meeting our goals and could even help a positive expectation of the result we are forecasting, both in terms of fiscal and growth. So, we have tried to have that level of prudence in the estimation to be very consistent throughout the entire document and we have also been prudent in growth .
Restrepo indicated that, in addition to the high oil prices in recent weeks, there was another positive surprise that could occur and that is that the amount of production was higher than seven hundred thousand and something barrels, which is the estimate that is is hitting
the frame . And the production?
Precisely on the amount of crude production, the alerts are on.
In this regard, last week the president of the Colombian Petroleum Association, Francisco Lloreda, stressed that in the middle of last month (May) we reached less than 700,000 barrels of production, that is, 680,000 barrels were produced, when we had times of more than a million barrels. "
In fact, at the beginning of this month, the Ministry of Mines reported that according to the most recent report from the National Hydrocarbons Agency (ANH), Colombia maintained the useful life of crude oil reserves at 6.3 years, despite the sharp drop in price in 2020 that affected both proven reserves and production. Proven gas reserves decreased for the third consecutive year, from 8.1 years to 7.7 years of useful life.
"2020 was a challenging year for the entire world, and the mining-energy sector was no exception. The country faces an important challenge in order to increase its proven reserves in both oil and gas," said Minister Diego Table.
Thus, by the end of 2020, proven crude oil reserves, as of December 31, corresponded to 1,816 million barrels, which means a decrease of 11% (225 million barrels), compared to the year earlier, when 2,041 million barrels were reported. Similarly, in 2020 production decreased by 11.5%, from 323 million barrels in 2019 to 286 million barrels last year, which explains why the years of useful life in crude oil did not decrease.
Considering the above, it is understood the urgency of increasing production, both in terms of conventional exploration and exploitation methods as well as non-conventional ones.
Faced with the former, precisely with the objective of increasing hydrocarbon production, on June 10 the ANH launched the Colombia 2021 Round, which made 32 new areas available to investors, of which 28 are offered by the entity and 4 were nominated by companies interested in participating in the process to continue with the reactivation of the hydrocarbon sector that began in 2019.
"Ten of the areas that the ANH is offering have great prospectivity for gas and 18 for oil, so the signing of new contracts, which will be added to the 35 signed in the last two years, will contribute to the increase in oil reserves. hydrocarbons and improve Colombia's energy self-sufficiency, "said Mesa.
The other bet is the exploitation of Non-Conventional Reservoirs through techniques such as hydraulic fractionation, better known as fracking.
In this controversial front (in fact a bill that sought to prohibit this exploitation methodology was sunk in recent days in Congress), the Government has already been working on the Integral Investigation Pilot Projects, suggested by the Commission of experts convened by the Executive and endorsed by the Council of State. There are already several initiatives with endorsement to begin the process and the licensing. / THE NEW CENTURY - AFP
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