Colombia has been all over the front pages after electing its first leftist president; Gustavo Petro. Many on social media have speculated that a leftist president in Latin America sounds like bad news; politically and economically. However, not all that glitters is gold.
Petro promised many things to Colombian citizens; Firstly he promised for a $5 billion social plan that would give free education, universal healthcare and promised to lift millions out of poverty.
In the second place is the measure of state of economic emergency, where he emphasizes its necessity to implement due to hunger as a social catastrophe, which justifies such a decision. In Colombia, if the president wants to call such a state, he must pass it through Congress and after a victory in Congress, he could rule and apply any law without its consent.
Third has been the energy transition to greener sources and away from fossil fuels. One of the collateral damages of this decision will be ECOPETROL, the Colombian oil and gas company in charge of 60-70% of the country’s oil and gas production. Petro announced that he would reform its activities from being an oil and gas producer to a wind and solar energy producer; he would also lay off management personnel, taking into account that it is 88.5% state-owned.
As president he would no longer offer new oil exploration contracts, but would maintain current active licenses. However, cutting new oil contracts could cost the Caribbean country $4.3 billion in tax revenues until 2026.
As we see, Petro is giving a ”people’s person” face to Colombians and the international community, addressing the Venezuelan-Colombian border as a human rights issue, hunger and poverty in many Colombian sectors, leaving aside the economic lung of Colombia and increasing taxes to the rich, lowering taxes to the rest. This economic transformation, as we see is trying to involve more Colombian workers, moving from fossil fuels to agriculture, manufacturing and renewables.
However, the energy reality of Colombia today requires more investment in natural gas exploration. According to the latest information from the Colombian Ministry of Energy: The gas reserves index is 7.6 R/P, i.e. there is gas for 7 and a half more years. There are 11 Offshore Exploration contracts. For the next 4 years 4 exploratory wells have been programmed and committed investments of $ 3,000 million. To date, investments of more than $800 million have already been made with the authorization of Free Zones for Petrobras, Repsol and Ecopetrol. Between 2007 and 2018, more than $1 billion has been invested. Not just anything is at stake
The challenges facing the gas business in the short term are the lack of clarity about where the gas will come from in the long term, lack of competition in supply, low growth in demand and reliability in transportation and distribution.
In view of this complex reality, a path is opening up for the import of gas via the Antonio Ricaurte binational gas pipeline from Venezuela, backed by the Cardon IV gas project. This bi-national gas pipeline was built during the Uribe-Chavez administration, which allowed the West of Venezuela to receive gas from Colombia with the promise that this flow would be reversed. There is a 10 year delay in the promise, but everything points to the alignment of the planets after a decade. On the one hand, Petro has promised to reestablish diplomatic relations with Caracas, Colombia will put more obstacles to develop its exploration and Colombia will need to import gas in a more stable way and finally, the gas business led by private companies in Venezuela is experiencing a rebirth.