Ecopetrol Shutting Wells as Costs Surpass Oil Price, Group Saysby
Driller turning off taps at several locations accross Colombia
Colombia will struggle to meet 2016 oil production target
Colombia’s Ecopetrol SA has started turning off the taps at several oil wells across the Andean nation as the cost of production exceeds crude prices, an industry group said.
The state-controlled producer is shutting heavy-oil wells in Colombia’s central Meta province, as well as other locations, said Ruben Lizarralde, executive president of the country’s chamber of oil goods and services, or Campetrol.
The worst crude-market collapse in a generation has left producers worldwide, big and small, short of cash needed to fund drilling, pay dividends and service debts. Oil’s plunge of more than 70 percent since mid-2014 so far hasn’t abated as U.S. supplies and output from the Organization of Petroleum Exporting Countries have risen in past months as producers fight for market share. The Brent benchmark is trading close to $30 a barrel.
“Ecopetrol is closing wells,” Lizarralde said in an interview in Bogota Tuesday. “Why? Because it’s more expensive to produce than $30 a barrel.”
Ecopetrol didn’t reply to several e-mail and phone messages seeking confirmation since Tuesday evening.
Colombia will struggle to meet the government’s 2016 oil production target of 944,000 barrels a day if oil prices remain at current lows, Lizarralde said. In addition, oil service companies including Weatherford International PLC are taking machinery to other countries in the region, threatening Colombia’s ability to ramp up production if oil prices rebound.
The average cost of producing a barrel of oil in Colombia is $35.30, the world’s seventh most expensive, Campetrol said in a Jan. 25 statement, based on data from consultants Rystad Energy. Many oil transportation companies in Colombia are charging excessive prices, Lizarralde said.
Production costs at the Rubiales field, operated by Ecopetrol’s partner Pacific Exploration & Production Corp., also exceed oil prices, according to Lizarralde’s estimates. Pacific denied that the costs exceed prices in an e-mailed response to questions.