Colombia’s green energy transition and Petro’s risky oil exploration ban narrative

According to industry experts, Colombian President Gustavo Petro’s intention to cease offshore hydrocarbon exploration as part of the nation’s shift to greener energy sources could jeopardize Colombia’s energy security and economic health.

Despite strides in recovery, the Colombian oil industry has yet to surpass its pre-COVID-19 operations, as investor and management expert Matthew Smith noted in an Oilprice.com article.

In May 2023, Colombia, a country with significant oil reliance, pumped an average of 773,789 barrels per day (b/d).

Though this showed a notable yearly increase, it was still 13.5% below the 894,519 b/d produced in May 2019, highlighting that production hasn’t fully bounced back.

Smith adds that natural gas production remains similarly stunted, causing significant concern for Colombia, which is already grappling with potential gas shortages.

Smith pinpoints various factors for this sluggish recovery.

Notably, the Colombian Petroleum Association (ACP) highlighted that private oil company exploration investments would see a 33% annual drop in 2023, plunging to US$700 million.

This investment dip, Smith speculates, might be linked to Petro’s tax hikes on the oil sector introduced in November 2022 and his inclination to halt new oil exploration contracts.

Both moves are pivotal in Petro’s blueprint to reduce Colombia’s fossil fuel reliance.

For perspective, oil, a vital economic driver for Colombia, comprised 29% of its export value in the first half of 2023.

Smith further suggests that security concerns, persistent protests against the oil industry, and heightened geopolitical uncertainty have burdened Colombia’s hydrocarbon sector.

These challenges might hinder Petro from securing needed Congressional backing for his hydrocarbon exploration cessation proposal, stalling his activist agenda.

According to the report, although ACP anticipated 55-60 exploration wells in 2023, data from the National Hydrocarbons Agency (ANH) indicates only 28 exploration wells were finalized in the initial five months of 2023.

Thus, Smith forecasts fewer wells for 2023 than the 68 drilled in 2022.

Furthermore, as of July 2023, only 24 drilling teams were active in Colombia, down from 35 in late December 2022.

In conclusion, Smith believes Petro’s policy could imperil Colombia’s energy security.

Given the looming natural gas shortage, there are concerns that by 2028, Bogotá, currently a net oil exporter, might transition into an importer.