More bad news for Colombia's oil industry

Colombia’s oil industry, beset by the problems of dwindling reserves, depressed oil prices, and ongoing terrorist attacks against the country’s oil infrastructure, has been pinning its hopes for the future on using hydraulic fracturing to develop Colombia’s shale oil. If Bloomberg Business’ sources are right, those hopes will soon be dealt a significant blow. According to two well-placed sources, international oil companies including Exxon Mobil Corp are going to indefinitely postpone their plans for exploring Colombia’s shale oil potential. Cratering global oil prices and a lack of legal clarity regarding hydraulic fracturing in Colombia are the reasons behind the decision. 

Exxon, Royal Dutch Shell Plc, and ConocoPhillips, all mentioned by the sources as having decided to postpone their fracking plans for Colombia, declined to comment for the report. Sebastian Borgarello a vice president for Wood Mackenzie Ltd. told reporters on February 5^th, “Since Exxon, Shell, Conoco are cutting budgets, it’s likely that Colombia spending will fall. Companies in general are very disillusioned with the country.”

In another piece of bad news for the Colombian economy, Santiago Castro, the chair of the Banking Association of Colombia, said in a statement that Colombia would experience a strong economic slowdown in 2015. He predicted that the country would fall just short of entering into a recession.  Colombia’s central bank also revised downwards its 2015 growth projections for the country’s economy.

The relentless bad news for the Colombian oil sector does not bode well for the broader Colombian economy. Hopefully the country finds a way to replenish its oil reserves despite the sharp decrease in investment in oil exploration.