LATAM Oil production: Colombia and Brazil oil exports rose despite pandemic

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Colombia and Brazil oil exports
rose despite pandemic


Just as Covid-19 affected each Latin American country differently, so too is the outlook of each country's future crude oil production and exports.

Speaking at the Argus Crude Live conference, representatives from Colombia's state-owned Ecopetrol and Brazil's state-run Petrobras detailed the years-long strategies that in a year fraught with hurdles managed to yield higher export figures.

Despite a collapse of global crude oil demand in 2020 amid the Covid-19 pandemic, Ecopetrol exports grew by 10-15pc amid growing production and lower domestic refinery activity. Growing output and optimization at the Buzios field, following years of investment, lead to higher-than expected production and export volumes for Petrobras.

"We exported on average about 680,000 boe/d in 2020," Petrobras global head of international trade Alexandre Trevia Leite said.

Normally Petrobras sells about 60-65pc of its crude exports to China, Leite said. But in 2020 when China stopped buying because of Covid-19-related drop in demand, Petrobras was able to find new buyers quickly.

"In 2020 alone we managed to sell and create 14 new customers specifically for Buzios," he said.

Petrobras' exports in 2020 reached 41 unique refineries around the globe in 18 different countries.

In 2020 Ecopetrol also found new homes for its crudes, including renewed exports to South Korea and India and exported about 411,000 b/d globally. This is up from 342,000 b/d in 2017 when the company readjusted its strategy to become the preferred supplier of heavy crudes in Latin America. This included a shift in customers to focus on end-users instead of trading firms, reflected in a sharp decrease of market share for the Caribbean and Central America between 2017 and 2020, from 18pc down to 4pc.

The US as a Ecopetrol target market has been little-changed as it posted just a 2pc increased to 41pc of market share over the last three years.

Half of Ecopetrol's exports last year reached Asia-Pacific shores, a marked increase from less than 30pc in 2017. Still, the Colombian company does not see ever-growing volumes from Petrobras as a threat to that market because of the quality differences.

"With Brazil, we see that we complement each other," Ecopetrol commercial and marketing vice president Pedro Manrique said. "Most of our crude are on the heavy side and Brazil is moving more toward intermediate and lighter crudes. If you look at the end users, (mainly China and India), they both need the same type of crudes."

Petrobras estimates its production will increase to roughly 2.3mn b/d in the coming five years, Leite said.




YPF to boost hydrobarbons investment
by 73% in 2021
to rebuild output


Argentina's state-backed energy company YPF plans to ramp up it investment 73% this year, with the brunt of the increased spending going toward rebuilding oil and natural gas production after a 10% slump in 2020, a company source said Jan. 26.

YPF aims to increase investment in its upstream business more than 90% this year compared with 2020, making it possible to "stabilize" oil and gas production and set it up to return to growth despite the natural declines at maturing conventional fields, the source said on the condition of not being named, citing company policy.

The plan, however, hinges on "the availability of cash," the source added.

To free up cash for investment, the source said YPF is trying to restructure $6.2 billion in international bonds, but so far bondholders have objected to its proposal. In response, the company has improved the offer to limit losses for bondholders while making a return to production growth more viable than if nothing were done.

"One of the objectives of this debt refinancing is to allocate funds to increase investments that make it possible to reverse the decline in the production of gas and oil in recent years," the source said.

Bondholders have until Feb. 8 to accept the offer.

Argentina's biggest oil and natural gas producer, YPF cannot readily borrow money on the international capital markets because the country is mired in its third year of a financial crisis, deterring lenders. This means it must rely on cash flow, which has been only slowly recovering after an eight-month lockdown of the economy last year slashed sales of diesel and gasoline. As a result, YPF's upstream and downstream investment plunged to $934 million in the first nine months of 2020 from $3.3 billion in all of 2019, according to company data.

In a November conference call with investors, YPF CEO Sergio Affronti said the company's total oil and gas production was likely to decline 10% in 2020 from 2019, but he added that as demand recovers the company will be able to gradually increase output.

YPF has since said that it plans to invest more in enhanced recovery techniques in its conventional fields to squeeze more out of the maturing reserves, while pursing growth in Vaca Muerta, one of the world's largest shale plays. The company wants to boost its share of crude production from Vaca Muerta to 25% of the total in 2021 from 20% in November 2020, and then take it to 45% or 50% in 2022 or 2023. YPF is the biggest producer in the play





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