When left-wing Colombian President Gustavo Petro came into power at the beginning of the year, he pledged that he would bring an end to new oil and gas exploration. But as the months go by, some believe he should rethink this approach, putting Colombia’s economy ahead of the green transition. Petro announced in January that he would not be approving any new oil and gas exploration projects and aimed to move Colombia away from its reliance on fossil fuels in favour of clean energy. Irene Vélez, the minister for mines, stated at the World Economic Forum, “We have decided not to award new oil and gas exploration contracts, and while that has been very controversial, it’s a clear sign of our commitment in the fight against climate change… This decision is absolutely urgent and needs immediate action.” This had long been part of Petro’s campaign but not everyone in Congress agrees with this approach.
Colombia continues to rely heavily on oil and gas production for its revenue, a vital contribution to the national economy. At present, the country has a shortage of proven oil and natural gas reserves. In addition, the industry was hit hard during the Covid pandemic, due to pauses in operations and delays in new projects. Production fell from around 884,876 bpd in March 2019 to 771,732 bpd in March 2023. And many of Colombia’s potential areas of exploration are unlikely to be developed due to Petro’s plans to end awarding new exploration contracts and ban hydraulic fracturing, which is deterring new investors. Some international energy companies are even exiting Colombia.
A statement from the Ministry of Mines and Energy suggested that Colombia’s oil reserves only expanded by 1.7 percent year-over-year to just 2.074 billion barrels of oil with a commercial life of 7.5 years at the current rate of production. Meanwhile, its proven natural gas reserves, which decreased by 11 percent compared to a year ago, to 2.82 trillion cubic feet, are only enough to support production for 7.2 years. Unless new development is approved, this could turn Colombia into an oil-dependent country, something that seemed near impossible just a few years ago.
Owing to Petro’s plans to curb oil exploration, the Colombian Petroleum Association (ACP) forecasts that private investment in exploration will decrease by around a third compared to last year, to achieve between $650 million to $700 million. This will likely lead Colombia to rely more heavily on its existing, dwindling reserves. If it becomes dependent on foreign oil to meet its demand, it would be vulnerable to weaker oil pricesand declining production.
At present, the government is attempting to revive some of its existing oil and gas projects in a bid to keep developing the industry without having to approve new exploration licenses. It hopes to help energy companies revive at least 21 suspended oil and gas contracts through a $38 million initiative, according to the National Hydrocarbons Agency (ANH). While Petro plans to stop new exploration, he has urged energy companies to develop already-awarded blocks. However, the oil industry continues to demand new licensing rounds to develop areas of significant potential in Colombia.
The ANH recently identified concessions across the country owned by several companies, including Geopark, Gran Tierra Energy, SierraCol Energy, majority state-owned Ecopetrol and Emerald, that could be beneficiaries of its multi-million Territorial Hydrocarbons Strategy. The agency stated, “We've been working on implementing an agreement focused on providing alternatives, to make exploratory activities facing delays in their execution viable.”
Energy companies must conduct community consultations before new projects can get off the ground, but previous governments have not helped in this process. However, the regulator plans to help firms coordinate with communities through entities such as the interior minister, “guaranteeing the development of social dialogue spaces and effective community participation.”
There is some cause for optimism as Ecopetrol recently announced a new oil and gas discovery in the Putumayo province. The firm drilled the Alqamari-2 well to a depth of 9,287 feet, achieving a daily flow of 1,800 barrels of oil. In addition, it saw a gas production of up to 825,000 cubic feet per day. This is good news for Ecopetrol, which experienced a decrease in its second-quarter revenue of 61 percent, largely owing to lower oil prices this year. The companies believe the potential resources could be rapidly converted into reserves, boosting Colombia’s hydrocarbons.
While there is still potential to develop Colombia’s licensed hydrocarbon regions, many are doubtful that this will be enough to allow the country to maintain its energy independence. President Petro decided to ban new oil and gas licenses in favour of a green transition, however, energy experts believe this may eventually make Colombia reliant on imports of the fossil fuels, as production decreases dramatically over the next decade. To ensure the country’s energy security it seems that Petro must either allow new licensing to go ahead or rapidly develop the country’s renewable energy sector to fill the anticipated demand gap within the next decade.
By Felicity Bradstock for Oilprice.com
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