January 20, 2015 / 6:48 PM / 3 years ago

UPDATE 1-Colombia oil output to fall a fifth by 2018, producers say

(Recasts with background and details; adds byline)

By Peter Murphy

BOGOTA, Jan 20 (Reuters) - Colombia’s oil output is expected to fall by more than a fifth by 2018 as companies cut back spending on exploration and production after the recent plunge in crude prices, the ACP association of oil producers said on Tuesday.

Average daily oil output will rise by 3 percent in 2015 to 1.02 million barrels, ACP chief Jose Lloreda told reporters. But it will then fall in 2016 by 100,000 barrels per day, or about 10 percent, from the current average of 1 million bpd, he added.

Production will slide to around 785,000 bpd on average by 2018, about a fifth less than now, Lloreda said, adding the drop may be less severe if crude prices rise and if the government adopts measures to assist the sector.

Brent crude oil was trading at $48.75 on Tuesday. It has fallen by more than half since June, when it was $116 a barrel, prompting producers to cut spending.

“This year it is feasible to maintain production above 1 million barrels. From 2016, what we forecast is a continual drop in crude production in the country,” Lloreda said.

Falling prices for Colombia’s most valuable export are bad news for the Andean country on several fronts: denting public finances and throwing up a new obstacle in its struggle to raise worryingly low oil reserves.

More than half of Colombia’s crude oil is produced by state-run Ecopetrol, whose shares fell about 45 percent last year as output fell. Colombia-focused Pacific Rubiales , listed in Toronto, is the largest private-sector producer.

Ecopetrol plans to invest $503 million in exploration this year, a third of what was budgeted for 2014. Production spending will fall nearly a fifth.

ACP is working with the government to draw up a plan to reduce the impact of lower prices on the oil sector, which could include measures for faster tax rebates to improve cash flow.

Colombia offered leases for onshore, offshore and nonconventional or shale areas in a bidding round last July as it tried to raise reserves from the 2.45 billion barrels that were estimated at end-2013, enough for about seven years’ output.

Lloreda said lower exploration budgets mean Colombia is drilling far fewer than the 230 wells that need to be drilled each year to maintain reserves. Last year only 113 wells were drilled, instead of the planned 212, ACP figures showed. (Editing by Meredith Mazzilli and Peter Galloway)

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