Colombia issues gloomy outlook for oil flows

OREANDA-NEWS. June 17, 2016. The Colombian government is forecasting a long-term decline in crude production and sustained low oil prices.

The finance ministry's mid-term fiscal report to the congress presented yesterday forecasts that production will shrink to 913,000 b/d in 2017, from a targeted 921,000 b/d this year.

Output will decline gradually to 903,000 b/d between 2018 and 2022, after which production will slide more dramatically to reach 838,000 b/d in 2027.

The revised output target is significantly lower than the June 2015 mid-term fiscal report estimate of 1mn b/d crude output for 2016-2022.

Oil associations ACP and Campetrol are echoing predictions for tumbling production because of sparse investment in exploration since oil prices collapsed in mid-2014.

The latest fiscal report also revised its projection for the 2016 Brent oil price to \\$42/bl, up from an earlier projection of \\$35/bl. The 2017 price is seen averaging \\$47.50/bl before gradually stabilizing at \\$70/bl in 2020.

"Never in our history has there been a fiscal income shock as bad as this one," said finance minister Mauricio Cardenas.

The finance ministry reported a loss of 800bn pesos (\\$267mn) in oil revenue in 2016 because the government was forced to return advances and withholdings to oil companies.

The new report anticipates zero income from state-controlled Ecopetrol dividends and other oil-related taxes and royalties in 2017, with a recovery to an estimated 200bn pesos in 2018.

The 2017 government budget will assume no Ecopetrol dividends.

Cardenas said GDP will grow by 3pc this year, down from a previous 2016 target of 3.8pc.

Economic growth is pegged at 3.5pc in 2017.

An independent committee not directly associated with the finance ministry generates the ministry's projections.