Colombia oil sector could see investment, output fall 30% by 2030 -report
Investment and production in Colombia’s oil sector could drop 30% by 2030 due to the government’s decision to block new exploration contracts, as well as the impact of a new tax reform that comes into effect this month, an independent committee said.
Last week, Colombia’s minister of mines and energy, Irene Velez, confirmed the government would not sign new oil exploration contracts, an announcement backed by President Gustavo Petro, who promised a transition towards clean energy.
Based on forecasts by the Colombian Petroleum Association (ACP) – which represents private industry – that estimate investment in the sector to drop 30%, production could fall by the same amount by 2030, said the Autonomous Fiscal Rule Committee (CARF).
“The policy of not signing new exploration contracts in conjunction with the tax reform discourages investment in the sector. The first prevents the possibility of new investments and the second causes an increase in the costs of existing projects,” the CARF said in a report published late on Thursday.
Petro has pledged to tackle Colombia’s dependence on exports of oil and gas in favor of agriculture and tourism.
Latin America’s fourth-largest economy could see its fiscal income fall by 26%, while external oil sales could drop 55% by 2030, reducing Colombia’s total exports by 9% and widening its trade deficit, the CARF added.
“The results show that a 30% decrease in investment in the period 2023-2030 would lead to a drop in production in 2030 of about 286,000 barrels per day,” the report said.
“In the base scenario, the trade deficit would reach 3.2% of GDP in 2030. The decrease in oil production would also lead to a decrease in the nation’s income, compared to the base scenario, by 2030,” it added.
The government should reconsider its decision regarding new oil contracts, the report said.
The new tax reform sets an income tax surcharge of between 5% and 15% depending on oil prices, based on historical prices from the last 10 years.