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Energy Focus: Colombia Series (3 of 3)

The government of Colombia seeks to accelerate the country’s path toward net zero emissions, while investors question the implications for the country’s oil & gas industry. This report is the third in a three-part WTR Energy Focus series on Colombia. It follows Oil & Gas Operators Guiding for Bottom-Up Growth… and Striking a Balance Between Energy Security and Fiscal Stability. Links to those reports are accessible in this report. Colombia’s natural gas demand will increase due to an energy transition and upstream operators with gas exposure realizing strong gas prices in an undersupplied market (as shown on right). Independent oil producers may face policy shifts from time to time but the delicate balance between fiscal stability and energy security suggests upstream activity should remain in the country’s interests. Indeed, independent operators plan for a significant scaling up in terms of onshore production (see Figure 10). Coal and oil are major sources of government revenue so the government will need to find a balance from a policy perspective. Energy security is important to consider for oil & gas given that demand growth has outstripped growth in reserves. Coal factors small in terms of Colombia’s energy consumption and holds no threat to energy security. However, as a major exporter of coal, Colombia seeks to avoid the risk of economic shock if global demand for coal dries up. Colombia has large hydro, wind, and solar resources that could position the country for significant expansion in its renewable power generation. The government also wants to develop energy transition-related metals like copper and nickel, but the potential for these metals to replace the large existing revenues from coal is far from certain. Colombia’s decarbonization plans suggest that changes to the agriculture and forestry sectors will play a significantly larger role when compared with the energy sector. Colombia’s per capita CO2 emissions resulting from fossil fuel consumption look low versus most countries, while land use-related emissions are high (see Figure 3). Nearly 80% of planned mitigation action by 2030 relates to agriculture and forestry. In the long term, Colombia intends to turn forestry into a net carbon sink.