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Petrobras Plans Dividend Squeeze To Fund Transition to Renewables

Petrobras Plans Dividend Squeeze To Fund Transition to Renewables

Brazil’s state-owned energy heavyweight Petrobras…

Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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Colombia's Oil Sector Faces Uncertainty Amid Green Push

  • President Petro aims to decarbonize Colombia and shift towards green energy, creating tension with the country's traditional reliance on oil and gas.
  • Despite Petro's climate pledges, Colombia's oil industry continues to expand with several ongoing and planned projects.
  • Questions arise about the feasibility of Petro's green transition, especially in light of similar incongruent actions by Brazil's President Lula regarding climate pledges and oil industry expansion.

Since left-wing Gustavo Petro took office as President of Colombia in 2022, he has pledged to move away from oil and gas in favour of green alternatives. Petro wants to show the world that a fossil fuel-reliant country can both decarbonise and be economically successful. 

However, many of Colombia’s oil and gas industry representatives do not agree with Petro’s approach, rather seeing a future for fossil fuels so long as demand remains. Many from the industry think it is vital to continue producing oil and gas to support the Colombian economy for as long as possible, with several projects in the works to continue developing the industry. 

Since coming into office, Petro has blocked new oil-and-gas drilling and spoken publicly on his aims to curb production in favour of renewable alternatives. This approach is somewhat controversial for a country that is the fifth-largest exporter of coal and an oil and gas producer with large untapped reserves. Yet, at the COP28 climate conference in December, Petro became the first leader of a large country and the first fossil fuel-producing state to endorse a call for a Fossil Fuel Non-Proliferation Treaty. This idea had previously only been supported by civil society and small island nations

At COP28, Petro also announced the launch of a major national climate policy, aiming to provide $32 billion –equivalent to around 2.5 percent of the country's GDP – to projects in green transportation, clean energy, and climate adaptation. Unlike many of his Latin American counterparts, such as AMLO in Mexico and Madero in Venezuela, Petro does not see long-term oil and production as key to economic prosperity. And some think Petro could be among a new generation of leaders that put greater importance on the environment and the potential impact of climate change. 

Petro is not the only Latin American leader to be shifting away from fossil fuels, with Brazil’s left-wing president Lula da Silva denouncing the continued drilling for oil and gas as part of his presidential campaign last year. The two countries are home to a large share of the Amazon Rainforest, which has gained increasing attention in recent years as climate activists and international organisations strive to protect important ecosystems in the region. During their short time in office, Petro and Lula have managed to significantly reduce deforestation in their countries

Despite ambitious climate pledges, Lula has come under fire in recent weeks for announcing that Brazil would join OPEC+ as an observer. He said that the move was aimed at convincing some of the world’s biggest oil and gas producers to invest profits in the renewable energy sector. Yet, shortly after the announcement, the Brazilian government auctioned off more than 602 lots for oil and gas exploitation. Brazil is also planning oil and gas increases of 63 percent and 124 percent, respectively, between 2022 and 2032, to make Brazil the fourth-largest oil-producing country in the world. This has left many questioning Lula’s dedication to his climate pledges and wondering if other Latin American leaders, such as Petro, will follow his example. 

Colombia has not yet halted oil and gas production and has several projects currently in the works. Last November, Colombia’s state-run oil company Ecopetrol and Brazilian partner Petrobras started drilling their Orca Norte 1 offshore appraisal well in the Tayrona block. The two firms hope to transport gas to the mainland via a new pipeline that would also run to the Chuchupa gas field. Ecopetrol is also working with Shell to develop their Gorgon discovery in the ultra-deepwater COL-5 block. 

Onshore, Geopark and Hocol are developing Llanos 123, which is one of five exploration blocks the pair were awarded in a 2019 licensing round. Following two successful discoveries, the duo are hopeful for more over the next year. Meanwhile, the independent Canadian gas producer Canacol plans to drill the Pola-1 exploration well on the VMM-45 block in the first half of 2024, following three recent discoveries. 

This month, Canadian firm Arrow Exploration Corp announced plans to drill 15 wells with a 2024 budget of $33.68 million. The company aims to expand the Tapir block and develop the Carrizales Norte (CN) field. It plans to drill three horizontal wells at CN, as well as four vertical wells. Arrow’s CEO, Marshall Abbott, stated“Arrow is proud of the work completed and results for 2023. Our average production rates more than doubled over the year and the company proved it was able to execute an aggressive capital work program.” He added, “The company believes it is capable of similar production growth in 2024. Arrow discovered a new, multizone core area and enjoyed a positive step change in reserves. Arrow was also able to complete a 100 square [kilometre] 3D seismic program and develop numerous new prospects.” 

Colombia’s President Petro has high hopes for the oil-rich country’s green transition, following up on climate pledges made during his 2022 electoral campaign. Petro made his stance clear at COP28, suggesting that he hopes to make Colombia one of the few oil majors to rapidly shift away from fossil fuels to renewable alternatives. Nevertheless, Colombia’s oil industry is continuing to expand, with several projects planned for the mid-term. In addition, following the incongruent actions of Brazil’s President Lula when it comes to climate pledges and the country’s oil and gas industry, many wonder whether Petro will be able to stick to his climate pledges while also stimulating economic growth for the South American country. 

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By Felicity Bradstock for Oilprice.com

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