Thursday, January 26, 2023

Oil sector worried about its future in Colombia

BOGOTA ( Associated Press) – Colombia’s announcement that it will not sign new oil and gas exploration contracts as part of a plan to advance the country’s energy transition has caused uncertainty in the hydrocarbons industry association.

The decision coincides with promises made since the election campaign of Gustavo Petro, Colombia’s first left-wing president, who came to power in August 2022 on the grounds that reducing gas and oil consumption is Colombia’s best defense against climate change. Fighting is the key. The country produces less than 1% of the greenhouse gas emissions in the world.

In a country where some 40% of exports depend on the hydrocarbon sector, there are questions about the plan that seeks to replace them and which according to the government will focus on tourism and clean energy.

Last week, during the World Economic Forum in Davos, the Colombian Minister of Mines and Energy, Irène Vélez, announced the government’s decision not to award new oil and gas exploration contracts, while acknowledging that she has the means to achieve the energy transition. The challenge is to “survive as a country” by generating other economies locally.

Francisco Loreda, executive president of the Colombian Petroleum Association (ACP), told The Associated Press that halting new contracts would lead to “less production in the future and therefore less income for the nation, and a threat to the security of the regions and the country’s economy.” energy sovereignty

The ACP calculates that the region contributes 20% of tax revenue to the government and 76% of royalties – payments that oil companies make to the state for exploiting subsoil – with which local administrations typically fund a number of projects in education, infrastructure, pay for. or health.

Following the announcement, Petro tried to calm the debate in the country by affirming that existing hydrocarbon exploration and exploitation contracts would not be suspended and that Colombia had reserves for internal consumption that would cover the period between 2037 and 2042. will reach. The country has more than 300 current hydrocarbon exploration and production contracts according to government balance sheets.

“This is a biased report,” says the spokesman for the association, because in his opinion it confuses proven reserves that have a 90% chance of extracting hydrocarbons, with potential ones that reach 50%, and potential ones only 10%. Huh. By his accounts, the proven stockpile will last about a decade.

Lloreda believes that while existing contracts will continue as they are, the brakes on new explorations will affect them and that it will be “a matter of time before the industry withers” in Colombia and companies wonder if they should continue to invest and make less. What will they be looking for in the short term and medium term profitability.

In addition to blocking new oil and gas exploration contracts, the government is pushing a bill through Congress to ban fracking, a more expensive technique that involves injecting chemical-rich water at high pressure to extract oil and gas from deep rocks. Therefore, state oil company Ecopetrol suspended millionaire contracts it sought to complete two pilot fracking projects.

In defense of their strategy, Petro has explained that with “strong” investment in tourism and the export of clean energy they will manage in the short term to “fill the gap we can leave the fossil energy we depend on.”

Leonardo Garavito, professor of tourism and hotel business administration at Externado University, told the Associated Press that although tourism in Colombia has been growing significantly since the 2000s, it would require doubling tourism exports, which would take at least five years. Without significant public and private investment and external factors that have paralyzed the sector in the past, like pandemics.

The Colombian Association of Travel and Tourism Agencies calculates that between January and September 2022, exports for travel and air passenger transport reached $5,263 million. While the ACP ensures that the export of oil and its derivatives reaches $17,710 million in 2022.

Regarding clean energy as a resource source, Ecopetrol President Felipe Bayon told Davos that the company already produces green hydrogen and that it plans to represent a large portion of renewable energy income in 20 years. However, he stressed that the country continues to need hydrocarbon funds while leading the energy transition.

Facing an expected sector, the Mines Ministry has said it will promote dialogue with citizens and businessmen to achieve a “fair energy transition” in the country.

Nation World News Desk
Nation World News Desk
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