Petro and the End of Oil Exploitation in Colombia

Petro and the End of Oil Exploitation in Colombia

On August 7, 2022, Colombia made a 180 degree turn in terms of managing its economic policy by electing the first president with a clear socialist vocation and tendency. One of the oldest democracies on the continent, with uninterrupted elections since 1830, saw an ex-combatant of a subversive group take office for the first time as president (and as commander of the military forces). Gustavo Petro, who laid down his arms at the end of the 20th century to join political life, has held important public positions, as Representative to the Cameral, Senator of the Republic, Mayor of Bogotá, the convulsed Colombian capital, and now president of the nation.

Always accompanied by controversy due to his radical proposals, which arouse detractors and supporters among all parties and regions, who consider him, respectively, as the cause or the solution to the country’s problems, Petro’s government programs seem completely contrary to what has been the historical management that the traditional parties have given to the country’s economy. In addition, his proposals promise to modify fundamental sectors of society, such as the provision of health services, the general system of pensions, and the reform of property and agricultural production.

Above all, the proposal that has generated the most controversy is the one that promotes the definitive suspension of oil exploration and exploitation in Colombia, as well as the reduction to a minimum of coal production for export, and the accelerated transition toward the use of clean and renewable energy.

For many economic analysts close to the energy and hydrocarbon production sector, this is not even a serious proposal worthy of consideration, one that does not obey a responsible analysis of the country’s economic situation, and which seems more like clientelism and demagogy, so common in Latin American left-wing rulers.

For other “greener” sectors, such as the political parties that support the current government, different national and foreign environmental organizations, and a good part of the population, what President Petro is proposing is simply the inevitable future that Colombia will face in the coming decades: Ending the country’s dependence on oil production and exports and the foreign currency it generates (more than 40 percent of the country’s total income comes from oil and coal exports) and thus be prepared for the future outlook.

Dr. Irene VĂ©lez Torres
Dr. Irene VĂ©lez Torres

One of the main defenders of the energy transition program proposed by the government of Gustavo Petro is the current head of the country’s Ministry of Mines and Energy, Dr. Irene Vélez Torres, who studied philosophy at the National University of Colombia, and earned a master’s degree in cultural studies from the same university, and a doctorate in geology and political geography from the University of Copenhagen in Denmark. As a Fulbright Scholar in 2020, Vélez pursued a postdoc in environmental engineering and science at Clemson University in the U.S. She carried out additional postdoctoral research in 2021 for the Center for Social Studies of the University of Coimbra in Portugal.

In line with the government to which she belongs, Minister Vélez has called on the governments they consider “ideological allies” of Latin America and the world to form a new economic bloc that will distance their countries from dependence on the extraction of non-renewable fossil fuels, and, in the case of Colombia, promote the transition to an economy driven by tourism, along with agricultural production at its full potential. And thus, effectively collaborate in the fight against climate change and against the economy of “the death,” as President Petro has cataloged the current world economic model, of generating and consuming large amounts of energy, regardless of the environmental damage that this entails.

Let us remember that Colombia is one of the main producers and exporters of thermal coal, with more than 54 million tons per year, but it barely exports between 200,000 and 300,000 barrels of crude oil per day, mainly destined for refineries in the United States. These two sectors of the economy represent more than 40 percent of the country’s total income and the main resources to finance most of the social programs.

However, the current government asserts that, historically, the activity of extracting fossil fuels has had little benefit to the communities that inhabit the mining regions and has only served to increase the profits of the private shareholders of the Colombian oil company Ecopetrol, multinationals that operate in Colombia, and the holders of concession and association contracts for the exploration and extraction of crude oil.

The main detractors of the current “progressive” government and its energy proposal state: First, the country’s oil production is already in decline, even without government intervention. (According to the National Hydrocarbons Agency, in 2021, proven reserves were estimated at 83 percent, and production at 73 percent, with the highest levels being reached in 2013.)

Second, given that more than 60 percent of the country’s oil production is exported, the global warming mitigating impact of such policy depends on Colombian oil importers, primarily the United States, not substituting oil from other countries.

Third, this policy does not focus on the country’s environmental footprint, measured by its greenhouse gas emissions, which are relatively small. In effect, Colombia ranks 121st in terms of CO2 emissions per inhabitant, which is only 11 percent of the emissions per inhabitant of the United States.

In addition, 74 percent of the country’s electricity production is based on renewable sources, mainly hydroelectricity, while domestic use of coal, the most harmful fuel for global warming, is relatively small.

The country’s performance as a CO2 emitter is acceptable because its per capita energy consumption is low. (Colombia ranks 40th in the world and its oil consumption per capita is half of other countries like Mexico.) If we go deeper into the details of the country’s fossil fuel consumption, it is dominated by oil with 36 percent of national primary energy consumption and natural gas with 23 percent.

With respect to gas, its production is in decline as well, so much so that the country has lost its self-sufficiency. In addition, most of the natural gas produced in the country is associated with oil production: Almost 50 percent of the gas production is required to be reinjected to obtain oil. In this context, a policy that seeks to restrict the development of new oil fields could result in a reduction in the availability of natural gas for domestic consumption, because producers may need to reinject more gas to increase oil recovery in existing fields.

Despite the criticism, the current Colombian government maintains that, with sufficient resources and the appropriate plans, its energy substitution program is not only possible, but convenient for the country. Specifically, through comprehensive support to agricultural communities (with subsidies and purchase of crops), the fight against political corruption, the country’s pacification process, and the revitalization of clean economies, it would generate sufficient resources to replace the current income received from the export of coal and oil.

However, the approval of the laws and the legal framework derived from these proposals will necessarily have to be debated and approved by the Congress of the Republic and the Constitutional Court, which will define the legality and Constitutionality of the government programs. Undoubtedly, the experts assure that it will be one of the most important and controversial debates for the current legislature, to which the government and its minister of mines promise “not to be intimidated” and have openly declared: “Planet Earth is the common home of human beings. And Colombia, from its enormous natural wealth, will lead the fight to protect it.”

Sources:

Gustavo Petro’s Oil Policy
by Phillips Wright Observatory
El Espectador newspaper, Bogotá
(August 22, 2022).

Figures on Production and Refining in Colombia for the Last 20 Years
Hydrocarbon National Agency
Official bulletin (July 2022).

The Oil and Energy Policy-Next Government Challenge
by Cristian Acosta Arango
La República newspaper, Bogotá
(April 8, 2022).

Gilberto Arango Londono
Colombian Economic Structure
McGaw Hill Publisher, Bogotá (1994).

Author profile

Angela Levy was born in Colombia and became a U.S. citizen in 2012. She is now a dual citizen of the two countries. She holds two master’s degrees, an MBA and another in accounting. Levy worked as a production engineer in Colombia before moving to the U.S., where she worked in the finance and accounting group at Halliburton for a decade. She later worked with special needs children for five years. Levy now spends her time traveling the western U.S. 

Author profile

Carlos Arturo Toro is a native of Colombia. An economist, he holds a master’s degree in finance. For more than 15 years, he was dedicated to the banking sector, as a credit analyst for Banco Popular de Colombia and as the national director of credit of various financial institutions. For several years after finishing his career in the banking sector, Toro worked as a tropical glacier guide and, periodically, as a volunteer park ranger for the Colombian National Park.

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