Business

Colombia only has enough oil reserves for 8 more years: Finance Ministry

posted by Wesley Tomaselli

 

Colombia’s rapid rate of oil production led to an extremely lucrative 2012, but the country’s oil reserves can reportedly only sustain this pace for eight more years.

In 2012, the state-owned oil giant, Ecopetrol, recorded net profits of $15 billion marking the firm’s second most profitable year ever.

“Ecopetrol gave us excellent results last year…which fills us with optimism,” said Colombia’s finance minister, Mauricio Cardenas Wednesday. “We’ve been at [1.18 million] barrels per day since the beginning of [2012].”

Yet as much as Colombia is optimistic about Ecopetrol, the minister warned that the country only has enough reserves to last it for eight more years, posing a serious threat to the economy.

“To increase our reserves we need to explore and to explore we need to invest…We have oil for 8.1 years and we know that is not much time to keep pace with one million barrels a day, so it is urgent that we explore,” said Cardenas.

The biggest oil producing company in Colombia is Ecopetrol which is 80% owned by the state. Cardenas specifically mentioned Ecopetrol and recommended that it ramp up its pursuit of well development. He also said that the country should maintain rigorous security along vulnerable pipelines.

According to the finance ministry, the security situation has improved since September, in large part due to the military’s protection. More than 20,000 troops protect oil infrastructure across the country. Without attacks, Cardenas wagered that Colombia could have produced 10 million barrels a day.

During the first half of 2012, Ecopetrol pipelines and production facilities were attacked a total of 67 times which dramatically dampened productivity. At the Caño Limon-Coveñas pipeline located along the Venezuelan border, losses totaled approximately $1 million per day. In 2012, the California-based Occidental Petroleum company declared a “force majeure,” whereby a company officially says that it is unable to fulfill its contract due to an impediment from a “greater force.”

MORE: Cano Limon pipeline halted by bombings; oxy may halt operations

Oil and mining have become one of Colombia’s most important, albeit unsteady, drivers of economic growth. Foreign investment rates continue to increase largely because of the country’s mineral rich territory, but also because of an improved security situation. In Colombia, the vitality of the former is directly tied to the stability and consistency of the latter.

MORE: Foreign direct investment in Colombia oil and mining sector swells

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