Colombian oil chamber hopeful of 'orderly' energy shift

A plan to end new oil and gas exploration activity in Colombia could lead to macroeconomic shocks and jeopardize the country's energy security, according to national industry chamber Campetrol. 

President-elect Gustavo Petro, who will become Colombia's first left-wing leader when he is sworn in on August 7, has vowed to stop issuing licenses for fossil fuel exploration as part of an economic overhaul that prioritizes investments in agriculture, manufacturing and renewable energy.

But Campetrol, which represents more than 140 companies in Colombia's oil goods and services segment, called for an "orderly diversification" process that did not exclude hydrocarbons. 

"Hydrocarbons directly affect 37 of the 61 branches of GDP activity," Campetrol president Nelson Castañeda told BNamericas. “Having sustained national production of crude oil and gas mitigates the cost of public services and therefore the cost of living.”

He added, “the possible loss in foreign currency due to the reduction in exports of crude oil and its derivatives should not be ignored. In 2021, they represented close to US$13.5bn. This shock could mean higher energy prices, an increase in inflation, foreign debt and the exchange rate, as well as a loss of the country's investment rating.”

Crude oil currently accounts for around 42% of Colombia's total exports while coal – which Petro has also promised to phase out – makes up 14%. 

A report published last month by financial services firm Corficolombiana warned that a decision to halt oil and gas exploration would prompt the peso to lose up to 44% of its value against the US dollar by 2027. Such a scenario would see the exchange rate plummet to 7,000 pesos to one dollar from around 3,900 today.

Meanwhile, the trade deficit would increase by 15-39% amid higher demand for imports, Corficolombiana added. 

In another report, national oil petroleum association ACP predicted that Colombia would lose its energy independence within five years under Petro's exploration ban. 

According to Castañeda, the industry has maintained hope that oil and gas exploration will be allowed to continue, despite Petro's campaign promises.

"We trust that the country's institutions will protect the rights acquired by the companies in our sector and will promote its comprehensive development," he said. "Likewise, we are convinced that the incoming government will make the best decisions in order to achieve sustainable regional development, guarantee energy security and improve economic growth, for which our sector is a cornerstone."

The full interview with Castañeda will be published in the coming days.