Academic literature on the topic 'Oil well drilling, Electric'

Designed a set of hydraulic experimental system for testing some performance parameters of oil drilling and production equipments and demonstrating its functions and principles. This system provided hydraulic environment for pumping unit, ESP (Electric Submersible Pump), well control devices, drilling and workover experiments, collected and analyzed experimental data, provided an important platform for the research and development of oil drilling and production equipments and experiment teaching. The functions and principles of hydraulic system’s components are introduced, and some main components are selected and designed in the system.

The article deals with development of bore drilling technologies over the past 150 years. Rotor drilling and drilling with turbo booms, electric drills, screw engines are analyzed.According to the author drilling operations of bores should consist of two parts the first of which provides maximum possible drilling speed, and the second – the proper disclosure of productive strata.When implementing the first and second parts of the project it is recommended to use service system for the implementation of certain types of work with the involvement of specialists of the profile. This applies in the first place to the regulation of the properties of washing liquids, the modes of their circulation in the well, and also the processes of fixing the walls of the well. According to the author service companies should also be involved in all types of recovery of filtration characteristics of reservoir layers.

<em>In the world of oil is very common in the production system. This production system produces oil from wells after drilling and well compressions. Over time, the production of a well may decrease due to several parameters of pressure drop and the presence of clay which makes the pipe diameter narrower. There are several methods used to increase the decrease in production including adding artificial lifts such as sucker rod pump, electric submersible pump and gas lift, reservoir stimulation and pipe cleaning if the pipe diameter is reduced due to clay. The well has been installed an artificial lift is a gas lift and this well need an optimization to increase its production. The EC-6 well optimization is planned by comparing the lift-up scenario of the gas lift by adjusting the rate of gas injection and deepening the orifice injection and also an installation of electrical submersible pump. Best percentage of optimization production from EC-6 Well, last scenario is chosen which is new installation artificial lift ESP from gas lift (existing) and gaining 18.52% form existing production</em>

The working environment of the oil drilling platform is harsh, with many uncertain factors and high operating risks. During the drilling process, due to sudden formation factors or improper process operations, it is extremely easy to cause well wall instability, sticking, lost circulation, well kick, and blowout. In addition, other complicated situations and accidents have brought major challenges to drilling safety. In order to improve the technical level of oil and gas exploration and development and achieve the goal of reducing costs and increasing efficiency, it is necessary to strengthen the optimization of traditional oil drilling monitoring systems. This article summarizes the advantages and disadvantages of the existing image multiscale analysis algorithms, from wavelet transform, stationary wavelet transforms to contourlet transform, and nondownsampled contours based on the characteristics of the images collected by different sensors in the oil drilling monitoring system and the needs of practical applications. Wave transforms detailed comparison of the fusion performance of these image analysis algorithms under the same fusion rules. Aiming at the shortcoming of the large amount of calculation of nonsubsampled contourlet transform, a fast implementation algorithm (IFNSCT) is proposed. The multichannel filter bank structure is used to replace the original tree filter bank structure, which reduces the time-consuming to the original without affecting the analysis performance of the algorithm. One-half of the oil drilling monitoring efficiency has been improved.

A large proportion of the North West Shelf development gas wells are long reach (greater than 3500 m) and highly deviated. For reservoir description and management purposes, comprehensive formation evaluation needs to be carried out in these wells.Considerable difficulties have been encountered with electric log data acquisition due to friction and borehole conditions in these long, highly-deviated wells. As a result, new techniques to log the zones of interest were introduced. A system using the drill pipe to transport the downhole logging tools has been successfully used.Also, low-toxicity oil-based mud (LTM) was introduced in order to ease drilling problems and borehole conditions. However, owing to the non-conductive nature of the oil-based drilling fluid, improvements were required in the vertical resolution of the resistivity measurements and the estimation of the formation porosity.A computer program using a forward deconvolution technique recently developed by Shell's research laboratory in Holland has been successfully applied to enhance the vertical resolution of the resistivity log reading.The large range of uncertainty on the pore volume has been reduced to reasonable level by calibrating the porosity log data against core data obtained in a well drilled with LTM.

The work is devoted to identifying the most relevant geological and technical measures carried out in Severo-Ostrovnoe field from the period of its development to the present. Every year dozens of geotechnical jobs (GJ) are carried out at each oil field-works carried out at wells to regulate the development of fields and maintain target levels of oil production. Today, there are two production facilities in the development of the Severo-Ostrovnoe field: UV1a1 and BV5. With the help of geotechnical jobs, oil-producing enterprises ensure the fulfillment of project indicators of field development (Mikhailov, N.N., 1992. Residual Oil Saturation of Reservoirs Under Development. Moscow, Nedra. p.270; Good, N.S., 1970. Study of the Physical Properties of Porous Media. Moscow, Nedra. p.208). In total, during the development of the Severo-Ostrovnoe field, 76 measures were taken to intensify oil production and enhance oil recovery. 12 horizontal wells were drilled (HW with multistage fracking (MSF)), 46 hydraulic fracturing operations were performed, 12 hydraulic fracturing operations were performed at the time of withdrawal from drilling (HW with MSF), five sidetracks were cut; eight physic-chemical BHT at production wells; five optimization of well operation modes. The paper analyzes the performed geological and technical measures at the facilities: UV1a1∦BV5 of the Severo-Ostrovnoe field. Four types of geological and technical measures were investigated: hydraulic fracturing, drilling of sidetracks with hydraulic fracturing, drilling of horizontal wells with multi-stage hydraulic fracturing, and physic-chemical optimization of the bottom-hole formation zone. It was revealed that two geotechnical jobs, namely, formation hydraulic fracturing (FHF) and drilling of lateral shafts in the Severo-Ostrovnoe field are the most highly effective methods for intensifying reservoir development and increasing oil recovery. SXL was conducted at 5 wells. The average oil production rate is 26.6 tons per day, which is the best indicator. Before this event, the production rate of the well was 2.1 tons per day. Currently, the effect of ongoing activities continues.

Drilling fluid plays the same role in oil and gas well drilling as the blood in human body. A new type of oil-in-water (o/w) emulsion drilling fluid has been developed using diesel oil as dispersed phase, brine water as continuous phase, xanthan gum as viscosity modifier and clay as emulsion stabilizer and filtration controlling agent. Initially, standard recommended techniques were opted to detect the rheological properties of the emulsions. The fluids have also shown stable properties upto 70°C after aging for 24 h. As drilling fluids encounter a lot of variation in temperature and pressure as drilling depth increases, hence the stability of such fluids becomes an imperative parameter. Furthermore, emulsion itself is a heterogeneous fragile system so the stability was investigated using shear stress-shear rate rheology measurements. Emulsions have shown strong shear-thinning (pseudoplastic) behaviour which is considered an advantageous property for the drilling fluids. Experiments conducted to determine the dynamic rheology of the emulsions have shown the elastic behaviour towards emulsion breakdown processes. The fluids have also shown physical stability after 30 days at ambient conditions. Inter-facial variables such as zaeta potential, inter-racial tension (IFT) and contact angle measurements were conducted to examine their role in stability characterization.

Drilling high-pressure high-temperature (HPHT) wells requires a special fluid formulation that is capable of controlling the high pressure and is stable under the high downhole temperature. Barite-weighted fluids are common for such purpose because of the good properties of barite, its low cost, and its availability. However, solids settlement is a major problem encountered with this type of fluids, especially at elevated downhole temperatures. This phenomenon is known as barite sag, and it is encountered in vertical and directional wells under static or dynamic conditions leading to serious well control issues. This study aims to evaluate the use of barite-ilmenite mixture as a weighting agent to prevent solids sag in oil-based muds at elevated temperatures. Sag test was conducted under static conditions (vertical and inclined) at 350 °F and under dynamic conditions at 120 °F to determine the optimum ilmenite concentration. Afterward, a complete evaluation of the drilling fluid was performed by monitoring density, electrical stability, rheological and viscoelastic properties, and filtration performance to study the impact of adding ilmenite on drilling fluid performance. The results of this study showed that adding ilmenite reduces sag tendency, and only 40 wt.% ilmenite (from the total weighting material) was adequate to eliminate barite sag under both static and dynamic conditions with a sag factor of around 0.51. Adding ilmenite enhanced the rheological and viscoelastic properties and the suspension of solid particles in the drilling fluid, which confirmed sag test results. Adding ilmenite slightly increased the density of the drilling fluid, with a slight decrease in the electrical stability within the acceptable range of field applications. Moreover, a minor improvement in the filtration performance of the drilling fluid and filter cake sealing properties was observed with the combined weighting agent. The findings of this study provide a practical solution to the barite sag issue in oil-based fluids using a combination of barite and ilmenite powder as a weighting agent to drill HPHT oil and gas wells safely and efficiently with such type of fluids.

Summary Ever since the first electric log was run in 1927, the oil industry relied on wireline-conveyed logging for the acquisition of formation data for petrophysical analysis. It was not until 1978 that the first measurement while drilling (MWD) tools were introduced in the field. The industry did not pay too much attention to them then because they did not offer sufficient information for petrophysical analysis. Furthermore, the reliability of such tools was notimpressive and their cost was unattractive. However, over the last 6 years, the drilling services industry has shifted its focus from just directional MWD to a complete directional and logging while drilling (LWD) package. The LWD tools that are built into special drill collars provide measurements of resistivity, neutron, density, and gamma ray. Significant improvements in the reliability of the tools and competitive pricing, as compared to conventional wireline logging, has offered advantages in running LWD in fields that have drilling and completion constraints (e.g., borehole stability) or difficult well trajectories. This paper discusses the benefits to Petronas Carigali of using LWD for formation evaluation. In the development of the Dulang West field, LWD was used extensively to acquire formation log data. The quality of the data and cost savings are addressed. A comparison between the wireline-conveyed and LWD data acquired in this field is also presented. The acquisition of formation data by use of LWD in Dulang West has made a significant contribution to the overall cost per barrel of oil produced, without compromising data quality. P. 496

COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIOR
A perfuração de poços de petróleo é uma operação complexa e de elevado risco e custo financeiro. Com o passar dos anos o número de poços horizontais e de longo alcance perfurados aumentou consideravelmente devido à existência de reservatórios mais profundos e de difícil acesso, além da necessidade de se obter uma melhor eficiência na extração do petróleo. Juntamente com este aumento na complexidade da perfuração surgiram problemas operacionais que, por muitas vezes, não são identificados e acabam sendo responsáveis pela maior parte do tempo não produtivo da operação elevando, assim, seus custos diários. Logo, o estudo destes problemas é de extrema importância para se garantir condições seguras de operação, além de contribuir para a otimização da mesma, mitigação dos efeitos causados e uma maior rapidez e eficácia nas tomadas de decisões. O presente trabalho apresenta uma metodologia de identificação de problemas operacionais a fim de otimizar a perfuração de poços, através da utilização de recursos computacionais, para gerar análises de previsão de torque, arraste e hidráulica e, posterior, comparação com os dados de perfuração obtidos, em tempo real, dos sensores de mudlogging e da ferramenta de PWD. A caracterização dos problemas foi realizada com base nos dados reais de poços horizontais, perfurados na Bacia de Campos, mediante a identificação de possíveis desvios importantes, que não estavam previstos, nos parâmetros de perfuração. Através da retro-análise dos dados de perfuração dos poços foi possível diagnosticar alguns problemas operacionais ocorridos durante esta operação, tais como: perda de circulação, prisão da coluna de perfuração, washout no tubo de perfuração e dificuldade de avanço causada por uma limpeza deficiente, pelo enceramento da broca e pela vibração na coluna de perfuração. Além disso, foram destacados também alguns exemplos que mostraram variações na tendência do torque em função de mudança na litologia do poço.
Drilling is a complex and a high risk process which involves high financial cost. Over the years the number of horizontal wells and extended reach wells increased, due to the existence of deeper reservoirs, which are more difficult to access, in addition to the need of having an improvement in the oil production efficiency. Along with this increased complexity of drilling, unidentified operational problems end up being responsible for most of the non-productive time and daily cost increase. Thus, analyzing such problems it is very important to ensure safe operating conditions, optimize drilling operation, control causes/effects and have a faster and efficient decision-making capability. This paper presents a methodology to identify operational problems in order to optimize drilling operation using computer resources to predict torque, drag and hydraulic effects and later on to compare with the drilling data obtained in real time from mudlogging sensors and PWD (Pressure While Drilling). Cases were based on real time data from horizontal wells drilled in Campos Basis, Rio de Janeiro, and the problems were identified with unforeseen changes in drilling parameters trend. After studying the available well data, it was possible to diagnose several operational problems occurred during drilling, such as: lost circulation, stuck pipe, drill pipe washout and difficulty in drilling due to a poor hole cleaning, bit balling and drill string stick-slip vibration. In addition, it was also highlighted some examples that showed variations in the torque trend due to lithology changes.

Many accident investigation techniques and other methods used by the petroleum industry today list a set of underlying human related causes and subsequent improvement suggestions. Do these techniques address the root cause behind the problem so that the appropriate initiatives can be implemented? The focus of the present thesis was to determine the human related root cause of two major accidents in the North Sea. This in order to give recommendations to improve the safety levels in the organisation. In order to achieve the above-mentioned goals, the IPT Knowledge Model was adapted to the given accidents. The data input into the model was based on interpreted observations from former investigation reports. The analysis of the blowout on Snorre A and the well control incident on Gullfaks C resulted in 49 and 63 observations respectively. For both accidents, the Human Factor that was indicated to have the largest affect on the accidents was Training and Competency (29% for Snorre A and 19% for Gullfaks C). Lack of competence was indicated as the majority subclass. Collectively, management and supervision, or lack thereof, was also indicated as being a contributing factor to the accidents. These final results coincide with the findings in other investigation reports. However, these are more acute, indicating a specific area of improvement within the company. By increasing the competency levels within the company and ensuring that the leaders and management have the proper tools to follow-up their employees and their operations, the safety levels and culture will improve.

Modern rheological analyses provide good possibilities to understand the deformation and flow of fluids under different conditions. These methods used so far in the food industry as well as in the paints and coatings industry should transferred to the oil and gas industry, especially to the drilling fluid sector, to understand the drilling fluid behavior under borehole conditions. Traditionally, the rheology of drilling fluids is based on measurements under atmospheric conditions. The present study describes a new HT/HP measuring system by Anton Paar GmbH consisting of a modern rheometer including a high-pressure cell. This new system allows rheological analyses under a pressure up to 1000 bar and a temperature up to 300 °C. In consequence it is possible to observe conventional challenges within the drilling fluid sector under new points of view. Within the present study different drilling fluid systems were analyzed under common as well as under new rheological aspects. The results of both measuring systems were compared to each other. Furthermore, drilling fluid properties such as density, filtration and settling behavior were determined under different temperature regimes. Regarding to the operating principle of the electric impulse drilling (EID) technique the electric conductivity plays an important role and has to be taken into account. The results of these tests are also presented shortly.

The costs of drilling in hard rock depend significantly on the available drilling technology. Conventional drill bits are especially adapted to the needs of the oil and gas industry but they are limited for drilling in crystalline formations. The Electric Impulse Technology offers a promising alternative for this purpose. The splitting effect of electrical explosions inside the rock is used to destroy the rock instead of working mechanical against the compressive strength of the rock. In a project funded by the BMWi (project number 0325253) a drill head was developed, which consists of a pulse power source of up to 500 kV and electrodes for a 12 ¼″ borehole. The drill head is designed for downhole pressures up to 1000 bar and temperatures up to 200 °C. A test stand has been implemented at the TU Dresden. Drilling tests under borehole like conditions could be performed. Drilling speeds of 1 m/h could be proven. The follow-up project started in the end of 2014. The drill head will be optimized and the power supply will be designed. The total system will be used in a test well and investigated.

Abstract Field D is a mature offshore field located in East Malaysia. A geologically complex field having multiple-stacked reservoirs with lateral and vertical faulted compartments & uncertainty in reservoir connectivity posed a great challenge to improve recovery from the field. Severe pressure depletion below bubble point and unconstrained production from gas cap had contributed to premature shut-ins of more than 50% of strings. As of Dec 2019, the field has produced at a RF less than 20%. Initial wells design consisted of conventional dual strings & straddle packers with sliding sleeves (SSD). Field development team was challenged for a revamp on completion design to enhance economic life of the depleting field. In 2015, as part of Phase-1 development campaign, nine wells including four water injectors were completed initiating secondary recovery through water flood. An approach of Smart completion comprising of permanent downhole monitoring system (PDHMS) and hydraulic controlled downhole chokes or commonly known as flow control valve (FCV) was adopted in all the wells in order to optimize recovery from the field and step towards intervention-less solutions. Seeing the benefits of intelligent completion in Phase-1, Phase-2, drilled and completed in 2019 – 2020 has been equipped with new technology "All-electric Intelligent Completion System" in 4 out of 8 oil producers. The new design addresses the reservoir complexity, formation pressure and production challenges and substantial cost optimization, phasing out the load of high OPEX to CAPEX. Installation of "All-electric Intelligent Completion System" has proven to be an efficient system compared to hydraulic smart completions system. It requires 50% to 75% less installation time per zone and downhole FCV shifting time is less than five minutes compared to several hours full cycle for hydraulic system. The new system has capability to complete up to 27 zones per well with single cable. It gave more options and flexibility in order to selectively complete more zones compared to hydraulic FCVs which requires individual control line for each zone. Future behind casing opportunities (BCO) have been addressed upfront, saving millions of future investment on rig-less intervention. In addition to that, non-associated gas (NAG) zones have been completed to initiate in-situ gaslift as and when required avoiding the dependency on aging gaslift facility. The scope of the paper is to show case the well design evolution during Field D development and highlight on how smart completion has evolved from original dual completion to hydraulic smart and recently to electric smart system, how it has contributed to cost and production optimization during installation and production life and also support the gradual digitalization of the Field D. In the end it demonstrates the optimized completion design to enhance the overall economic life of the depleting field.

Abstract This paper discusses applications for lithium-ion batteries in an offshore oil and gas environment and describes how battery packs/energy storage can be applied in hybrid, diesel-electric power plants to create low-emissions drilling rigs. The incorporation of energy storage, particularly in direct current (DC) based power plants, can provide a wide range of benefits for operators, allowing them to reduce the runtime of onboard diesel engines and optimize combustion efficiency, thereby maximizing fuel utilization and reducing emissions. Batteries can also be used to create new redundancy schemes, as well as for peak shaving and blackout prevention. The West Mira semisubmersible installation in the North Sea was the world's first modern drilling rig to operate a low-emission hybrid (diesel-electric) power plant with lithium-ion batteries connected to the main power grid. The paper describes the energy storage solution that was implemented on the facility and discusses how considerations for safety and reliability were addressed.

Abstract Owing to superior temperature stability in comparison with water-based drilling fluids, oil or synthetic-based drilling fluids are generally preferred for high temperature and high pressure (HTHP) formations. However, the thermal degradation of emulsifiers and polymeric components under HTHP conditions that results in loss of rheological and filtration control, barite sag or even fluid phase separation also occurs. It is a challenge to sustain these properties stable under such harsh condition. Since nanoparticles have potential to provide better thermal stability, improved filtration loss as well as emulsion stability, the aim of this study is to investigate the effect of nano carbon spheres on the properties of oil-based drilling fluids under high temperature conditions. The nano carbon spheres were synthesized with the hydrothermal reaction of glucose. The influence of nano carbon spheres on the rheological, filtration, emulsion stability, settlement stability, as well as lubricity of a typical mineral oil-based drilling fluid with oil to water ratio of 80:20 was investigated before and after thermal aging at 180 and 200°C, respectively. The structure characterization showed that the uniform hard nano carbon spheres exhibited intermediate wettability. Laboratory performance test indicated that, for the oil-based drilling fluid, the addition of nano carbon spheres improved the rheological properties in terms of yield point and the ratio of yield point to plastic viscosity, which is beneficial for transporting of drilling cuttings. After thermal aging at 200 °C, the filtration loss volume was reduced as high as 70%, and desirable filter cake quality was obtained by incorporation of 1.0 wt% spheres, meanwhile the electrical stability was improved both before and after thermal aging. Furthermore, the fluid formulated with the nano carbon spheres generated better barite sag control. The polarizing microscope observation showed that the nano carbon spheres accumulated at the water-oil interface and formed a steric barrier which probably explained the reason of the above enhanced performance. The green synthetic routes and environmental friendly characteristics of the nano carbon spheres, in combination with the excellent properties suggested that the nano carbon spheres hold potential as multi-functional additives for formulating oil-based drilling fluids for HTHP drilling operations.

Abstract The horizontal section length of shale gas horizontal wells in Sichuan Basin in the south-west of China generally exceeds 2000m. Cuttings are apt to accumulate and form cuttings beds along such long and curve horizontal sections due to low cuttings carrying capacity, which often results in excessive torque and drag or even stuck pipes during drilling process. According to the statistics dada inthe period of Jan. - Oct. 2019, more than 25 stuck pipe incidents and 15 rotary steering tools loss in borehole were reported due to inefficient cuttings transportation in the long horizontal wells in Sichuan Basin. This paper studies the cuttings transportation and cuttings bed formation in horizontal wells. A prediction model for the distribution of cuttings bed was established. A monitoring and analysis software for the cuttings bed and cuttings cleaner with V-shaped spiral blades that is used to agitate the cuttings bed wasdeveloped. The software calculates the distribution and thickness of the cuttings bed according to the well trajectory, wellbore structure, drilling fluid characteristics, etc., and provides the optimal operating parameters for the removal of the cuttings bed by the rotating and reciprocating drill string. Then, the drill cuttings remover in the drill string moves to the predicted position of the drill cuttings, scrapes the drill cuttings and creates a swirling flow during the pipe rotation. The combined application of software and makeup remover can effectively solve the issue of borehole cleaning in long horizontal wells. One of the field applications was carried out in the well Ning 209H12, a shale gas horizontal well in Sichuan Basin. The well experienced excessive torque and drag issue during the tripping of drill string of long horizontal section. Thesoftware ran based on oil well data, and it determines the placement and thickness of cuttings beds in the well and calculates the optimal operating parameters for a flow rate of about 32L/s and a speed of 100rpm to remove them. By rotatingand reciprocating the drill string with recommended operating parameters along the cuttings bed interval, the removers helped cleaning the cuttings bed efficiently and significant amount of cuttings was observed at vibration screen. After cleaning the cuttings bed interval, the trip smoothly ran to the bottom without any excessive torque and drag, and then continues to drill in cooperation with the removers to the total depth. During the well completion, there was no problem with the operation of electrical logging and production casing. This cuttings removal technology has been used in other shale gas formations and tight gas formations where horizontal wells are widely used.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.