15 November 2013 16:25 [Source: ICB]
Host to this year’s APLA annual meeting, Colombia is expanding its oil and gas and petrochemicals sector, as political stability and economic growth improve investment conditions
The Colombian economy has maintained surprisingly high rates of growth in the last few years despite slowing rates in other South American countries, most notably in Brazil. The economy is expected to gain speed in the second half of 2013 and should remain buoyant into next year; the government is forecasting growth at an annual rate between 4.5% and 5% for 2014.
Old town Cartagena
Copyright: Rex Features
Crude oil has become Colombia’s main export and an important growth driver, which has put pressure on the government to boost both reserves and output levels.
The country is aggressively trying to boost production and attract new investment as its oil reserves are estimated at less than seven years.
Colombia’s oil output rose by a little over 3% last year to 944,000 bbl/day, a growth rate that came in below the expansion in reserves, according to the mining and energy ministry. Production has almost doubled since 2007 and is expected to increase again this year. Crude production in August averaged 1.03m bbl/day, up 14% year-on-year, the ministry reported in September.
Oil companies are not yet extracting shale oil in Colombia, but the government plans a bidding round for exploration blocks that may hold large shale deposits.
Just as Colombia has experienced a significant increase in oil production over the past five years, the petrochemicals segment is expected to follow a similar upward trend. At the beginning of the 1990s, in order to analyse the different options that would allow the Cartagena Refinery (Reficar) to improve its competitiveness and to support the development of the petrochemical sector, Ecopetrol began to study a project called the Development Master Plan (PMD).
The refinery, fully owned by Colombia’s state-run oil company Ecopetrol, will raise refining capacity on completion of the project in 2015 to 165,000 bbl/day from 80,000 bbl/day as Colombia’s crude output creeps up. The refined products will be distributed to domestic markets and to international markets such as the Caribbean and the US, according to the state-owned oil company.
The project – which is budgeted to cost almost $6.5bn (€4.8bn) – is expected to make the refinery a strategic asset for the energy security of Colombia. It should boost the development of the Colombian Caribbean Coast region and the local manufacturing sector, Ecopetrol said.
The company will also expand its Barrancabermeja refinery. The expansions will likely prompt growth in the petrochemicals sector by increasing the available quantity of feedstock.
Since the announcement of the refinery expansion, several polymer producers have also announced their intentions to expand. Mexichem, the largest polyvinyl chloride (PVC) resin producer in Latin America, has undertaken a major expansion plan in the past few years, another boon to Colombia. The company plans to add approximately 60,000 tonnes/year of emulsion PVC capacity by 2014 in Cartagena.
The expansions would raise Mexichem’s global PVC capacity 1.5m tonnes/year and the additional output would be exported to regions including Europe, South America and India. Colombia usually exports to Brazil and the rest of South America.
Propilco, an Ecopetrol subsidiary and Colombia’s only polypropylene (PP) producer, will benefit directly from the increased refining capacity. Ecopetrol provides Propilco with 30% of the propylene used in its products, according to the British Colombian chamber of commerce.
Colombia’s petrochemical future looks like it will depend on increased production of hydrocarbons for feedstocks and more investment in facilities of the natural-resource rich country.
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