Energy Focus: Colombia Series (2 of 3)
Colombia’s oil & gas reserves growth has fallen short of domestic demand growth and yet the government has proposed raising taxes on oil & gas producers. This report sheds light on why Colombia’s government, which is highly reliant on fossil fuel industries for revenue, may need to consider a fiscal regime for oil & gas that both supports government revenue and, for reasons of energy security, considers the maturity of onshore oil & gas supply. This report is the second in a three-part series on Colombia’s oil & gas industry. Our first report in the series (link in our full report) discussed how smaller operators are navigating through Colombia’s oil & gas industry dynamics and finding growth opportunities. Colombia has until recently had attractive fiscal terms for upstream oil & gas. Operators have benefited from relatively low royalties, high natural gas prices, and market-based oil prices. However, Colombia’s environmentalist President Gustavo Petro’s attempts to raise taxes in the oil & gas sector have introduced uncertainty. Colombia’s oil demand growth rate has been among the world’s fastest over the last decade (see Figure 7), while domestic gas demand has been constrained by limited domestic supply. With new onshore oil & gas discoveries now smaller when compared with the larger-sized discoveries of more than a decade ago, proven oil & gas reserves by 2022 were down by 16% to 48%, respectively, when compared with peak levels of 2012-2013. Years of collapsing oil exports, falling natural gas reserves life, and rising natural gas prices all point to a tightening trajectory for Colombia’s domestic oil & gas supply. Uncertainty related to future fiscal terms for oil & gas and government actions like last year’s ban on fracking could hasten the trend, leading to questions about future fiscal stability and energy security. Indeed, according to the IEA, security of energy supply should be a priority for Colombia during the country’s energy transition path. Our forthcoming third report in this series will discuss Colombia’s ambitious energy transition plans and implications for the oil & gas industry To access more WTR natural resources reports, please see our full report.
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