Press Release

Colombian Oil and Gas Association receives with concern the announcement that new exploration contracts will not be signed

Bnamericas Published: Saturday, January 21, 2023

This ACP release was published using machine translation.

The Colombian Association of Oil and Gas (ACP) receives with concern and surprise the announcement by the Minister of Mines and Energy, Irene Vélez, within the framework of the World Economic Forum in Davos (Switzerland), not to sign new oil exploration contracts and gas in Colombia. In this regard, the union is allowed to communicate that:

  1. The exploration and production of oil and natural gas is essential to guarantee the country self-sufficiency and energy sovereignty, in the short, medium and long term, while the responsible transition that Colombia requires is advanced. The main challenge of our transition is not in the diversification of the electrical matrix but in the energy matrix and that will only occur with the transition of the automotive fleet, since the country depends on fuels derived from oil and gas for 99%. Without transition in the automotive fleet there is no energy transition. You need to give it priority.
  2. The hydrocarbons industry is essential for the economic stability of the country, national financing and that of the departments and municipalities. About 40% of exports depend on this sector, 20% of the Nation's tax revenue and 76% of royalties. Diversifying the export basket should be an objective, but not at the cost of withering the industry. And, the development of other sectors, such as tourism, has enormous potential, but it will take time. That transition will not happen anytime soon. A triple transition is needed: energy, fiscal and royalty, and productive.
  3. After five months, the national government has not told the country how it hopes to realistically replace oil and gas, knowing that the proven reserves last for approximately 10 years and that the exploration contracts signed do not ensure self-sufficiency nor energy sovereignty in the medium and long term. Nor has it explained how it will replace the tax revenues that the industry contributes to the Nation (fundamental in the past tax reform) or royalties. For this reason, in different scenarios, we have called for caution. For a transition to be just, it must be responsible.
  4. Colombia contributes 0.37% of the planet's Greenhouse Gases. Hence, the President of the Republic has recognized that it is an insignificant contribution. Of these, 59% is produced by the agricultural and livestock sector, deforestation and misuse of the land. 31% is associated with the generation and consumption of different energy sources, transportation being the most significant with 12%. Oil and gas exploration and production activity contributes less than 1% of the country's total emissions. Not signing new exploration contracts destroys a fundamental industry by the drop, makes no difference in the global climate crisis and will impoverish Colombia.
  5. The president of Ecopetrol, Felipe Bayón, at the same World Economic Forum, pointed out that it is necessary to continue the exploration and production of oil and natural gas, and that this is not incompatible with advancing in the energy transition of the country and the company. The position of the Minister of Mines and Energy clashes with that of the President of the most important company in the country. The future of the state majority company is concerned because it is not allowed new exploration contracts directly or alongside private companies, through the National Hydrocarbons Agency (ANH).
  6. The national government affirmed last year that it would submit the decision whether or not to sign new exploration contracts to a study of the country's hydrocarbon potential, an analysis of the signed exploration and production contracts, and the time that Colombia will need from the industry to its export diversification, and the substitution of fiscal income and royalties. Such a study does not exist. They have prepared superficial analyzes that do not include the macroeconomic and fiscal component, the financing of the regions and productive transformation, especially in the oil zones.
  7. The oil and gas industry reiterates its willingness to continue working with the national government in building a joint vision of the country and its energy, social and environmental opportunities. And, in particular, in an export, fiscal and responsible regional and productive financing energy transition, which consults national interests.

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