Who will save Colombia's oil industry?

Oil prices keep dropping, and with them, so does the value of the Colombian Peso versus the U.S. dollar. Until those trends start to reverse themselves, Colombian headlines will be dominated by stories about the oil industry and its effect on the broader Colombian economy.

El Espectador published an article on Sunday expressing the paper’s incredulity with the rapid turnaround in fortunes that Colombia’s oil sector has undergone. The report noted that just a few short years ago, Ecopetrol, Pacific Rubiales, and Caracol Energy, the three leading players in the Colombian oil and gas industry, were the leading lights in the Colombian economy, their valuations were at all-time highs. Since then, however, their stock prices have fallen by 43%, 65%, and 71%, respectively. 

El Espectador explained that the fall wasn’t entirely caused by dropping oil prices; attacks against oil infrastructure, disputes with local communities, delays in securing environmental licenses, and changes in tax policy also played an important role. There will not be any easy solutions for the oil industry. Colombia is too small of an oil exporter to have any real impact on global prices, so the country will just have to find a way of withstanding the short- and medium-term economic shock.

Separately, covering a press release put out by the Colombian National Hydrocarbons Agency, Reuters reported that oil companies are expected to invest $8 billion and drill 1,086 development wells in existing oil fields in Colombia in 2015. It is worth noting that last week, surveys done with oil companies showed that the companies themselves expect to decrease investment in exploration in 2015. The Colombian government is considerably more bullish in its projections – they can’t both be right.