Aug. 4, 2020
Currently producing roughly 860,000bpd, Colombia is the 22nd-largest producer in the world and the fourth-largest in Latin America after Brazil, Venezuela, and Mexico. However, its total proven reserves of merely 1.7 million barrels account for merely 5.7 years of domestic consumption.
Though the reserves of Ecopetrol, the state-owned oil company, are somewhat higher (equivalent to 7.2 years), these too are somewhat low compared to other producing countries. To maintain both its energy independence as well as the health of one of its most dominant economic sectors, many within the government and private sector are calling for the country to start fracking. And they are putting their money where their mouth is: Ecopetrol alone has plans to spend USD500 million on unconventional exploration in the next three years alone, its CEO told Reuters in 2019.
A dangerous and controversial practice that includes breaking up rock formations with sand, chemicals, and pressurized liquid to find carbon trapped deep in shale rock, advocates say fracking could triple Colombia's total reserves, Mines and Energy Minister María Fernanda Suárez told reporters. On the other hand, environmental activists warn the practice could damage water supplies and cause earthquakes, especially since up to 16% of hydraulically fracked oil spills in the US each year, according to the US Environment Protection Agency.
So far, the government of Iván Duque seems willing to take its chances. With four fracking pilot programs ready to get off the ground—one run by the Alabama-based Drummond coal company and the other three by Ecopetrol, Exxon Mobil, and ConocoPhillips—the industry is merely waiting for a final ruling from the country's top legal authority, the Council of State, on whether or not it will finally terminate a temporary moratorium on unconventional exploration placed in 2018 and 2019.
Though activists saw the council's decision to order Drummond to suspend operations at 15 different wells at its La Loma block in December 2019 as a major victory, in March 2020, the government published regulations for pilot projects that entail the drilling, fracking, and measuring of non-conventional deposits. These, of course, were written with the aforementioned pilots in mind, which, according to the Colombia Petroleum Association (ACP), could entail USD600 million in investment in their first phase alone. Once they get off the ground, argues Executive Chairman Francisco Lloreda, they could generate USD5 billion a year in investment alone.
And fracking is hardly the only potential solution to Colombia's dwindling reserves. In the spring of 2019, ExxonMobil and Ecopetrol SA each signed joint contracts with Spain's Repsol SA worth a collective USD700 million in investment to explore offshore blocks in the country's Caribbean. Each around 400,000ha, Exxon and Repsol will split participation in the COL-4 block some 100km north of Bolívar province, while Repsol and Ecopetrol will explore the GUA-OFF-1 block 80km north of La Guajira. What's more, The Hague-based Shell, Texas-based Noble Energy and Calgary-based Parex have also signed contracts to operate new offshore blocks that should bear considerable fruit.
All this said, the swift rise of COVID-19 and the attendant price collapses it has wrought are giving environmentalists a moment of reprieve. With the price of oil hovering at its lowest in nearly 20 years, partially due to COVID-19 and the Saudi-Russian price war, pricier long-term investments in fracking and offshore have momentarily lost some of their luster. Though environmentalists may count this as a temporary victory, it does nothing to assuage Colombia's long-term energy dilemma. How these shocks might influence the Council of State's decision, expected no later than July 2020, is more than ever anyone's guess.