With just a few exceptions, the Colombian extractive
industries are suffering greatly. The scourges of illegal
mining and plummeting
global oil prices have already been expanded upon in this blog, but it does not
appear that there will be relief any time soon. Goldman Sachs lowered
its projections of global oil prices in 2015 by 17%, from $90 per barrel to $75
per barrel. To appreciate the impact that this will have on Colombian society,
keep in mind that the Colombian government made its budget projections for 2015
and 2016 assuming a base world oil price of $100 per barrel. For every dollar
that is shaved off world oil prices, Colombia loses
over $200 million USD. Goldman of course also lowered its expectations for
Pacific Rubiales and Ecopetrol, the two leading oil companies in Colombia, and
their share prices quickly plummeted.
However, despite this uncertain context and rumors
of takeover bids, Pacific Rubiales also had some good news. In September and
October, 72% of the exploratory wells that the oil company dug were successful.
The vast majority of these wells was located in Colombia and Peru. Pacific
Rubiales will need to keep up this streak if it wants to counteract the effect
of low oil prices on its stock.
The Colombian oil industry isn’t alone – the mining industry
has also been severely affected by declining world commodity prices. Mining-related
revenues have fallen
50% in the last 20 months, with much of this decline occurring in the coal
mining sector, which represents 70% of mining-related GDP in Colombia. That
said, coal isn’t the only problem with the Colombian mining industry. Nickel
prices have also plummeted
dramatically, severely affecting Colombian nickel mining and the communities
that rely on this activity.
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