Beyond the energy self-sufficiency that the country has had since 1986 (after the development of the Caño Limón field) and that is now evident in everyday situations such as filling up the car, turning on the stove to prepare breakfast, heating water for bathing, or turning on the air conditioning, the oil and gas sector has become one of the main sources of resources for the country's development.
Now, in the midst of the downturn in recent years in exploration investments, production, and crude oil reserves that today stand at 1.782 billion barrels (5.7 years of self-sufficiency) and the limited supply of gas contracts for the industrial sector, the country is engaged in a political debate about the exploitation of unconventional hydrocarbons, through the technique of hydraulic fracturing of the rock that generates hydrocarbons, known as fracking, which recently allowed the United States to become the world's leading oil producer.
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Industry projections show that only with this type of resource could between 2.4 billion and 7.4 billion additional barrels of crude be added to reserves and at the same time clear the long-term outlook for natural gas supply, but it would also lead to an increase in oil revenue, which comes through income tax, dividends from Ecopetrol, and royalties, the reduction of which in recent years led to tax adjustments and spending cuts.
Indeed, today, when the Colombian government has a shortfall of 25 trillion pesos in the 2017 budget, according to figures from the National Hydrocarbons Agency (ANH), it shows that between 2007 and 2016, oil revenue was 198 trillion pesos, equivalent on average to 22 percent of the central government's current income, but whose contribution has decreased to the point that last year it was only 0.1 percent of GDP, according to the Ministry of Finance.
“Let us not forget that one in four pesos of tax revenues comes from this sector and 4 out of every 10 that we invest in regional social development comes from oil royalties,” says the outgoing president of the ANH, Orlando Velandia, highlighting the importance of the contributions of the oil industry to the economy.
Precisely, between 2009 and August 2018, according to the official, royalties generated by the exploitation of hydrocarbons amount to around 60 trillion pesos. In addition, according to the entity, the social investment of companies, which was 76.397 billion pesos between 2009 and 2011, but after adjustments made to the oil contract, setting a mandatory minimum percentage, totaled 814.623 billion pesos between 2012 and 2017. Ismael Arenas, president of the Colombian Association of Engineers (Aciem), emphasizes that this is a strategic player in the economy, which has sought to develop the principle of responsible exploration in terms of environmental protection, the quality of life of communities, and regional development.
The potential to be harnessed
Analysts in the oil industry indicate that to extend self-sufficiency and keep the specter of imports at bay, it is necessary to incorporate at least 1.3 billion barrels of oil into existing reserves, a task that can be advanced with the development of projects such as enhanced recovery (extracting more) in current fields, the initiation of new areas on land, and projects at sea.
But it is in unconventional deposits (YNC), through fracking, where hopes are placed not only to triple but even quadruple resources, maintaining a constant income for the struggling public finances. For Francisco José Lloreda, president of the Colombian Petroleum Association (ACP), it is not guaranteed that at least 860,000 barrels will continue to be produced over the next 10 years, due to the natural decline of many fields.
The projections of the guild estimate that if the expectations of the companies validating the presence of crude oil in the YNC for its subsequent development are met, the first production would occur in 2024, with about 43,200 barrels per day, a volume that would have sustained growth until reaching 123,000 barrels per day in 2028. And it is that the firms interested in the activity estimate not only this potential between 2.4 billion and 7.4 billion recoverable barrels of oil in the Magdalena Medio area, not counting the gas in the Cesar-Ranchería basin, which in addition to providing more years of self-sufficiency, would trigger a series of economic benefits for the producing regions and for national and regional accounts.
Ecopetrol estimates that with the development of the YNC, municipalities would end up receiving 1 billion dollars in additional oil royalties each year. Héctor Manosalva, Vice President of Development and Production at Ecopetrol, explains that in the Magdalena Medio region, where this operation would be concentrated, and which is strategic due to its proximity to the Barrancabermeja refinery, 124,000 jobs would be generated, both direct and indirect.
Likewise, the linkages associated with the provision of goods and services for the oil sector would have a representative increase, as the development of the YNC would generate 8.5 billion dollars in annual investment (60 percent of foreign investment in 2017). Another benefit derived from the YNC would be the increase in exports, estimated at 15 billion dollars. “This would help close the trade balance deficit,” Manosalva noted.
With these projections, companies and governing entities in the oil and gas sector are ready to advance in the development of this activity, based on technical and scientific foundations, facing the country. In fact, the Minister of Mines and Energy, María Fernanda Suárez, maintains that the YNC can be developed responsibly and safely. And she points out that if they are not developed and without a large field like Cusiana (Casanare), it will be very difficult to find reserves of that magnitude.
Rising gas tariffs are a sign of the need to explore and produce.
Talking about fracking in Colombia also means, according to experts in the hydrocarbons industry, long-term energy security for the more than 9 million families who currently have gas in their homes and for the industries that have found in this energy source a solution for supplying their production machines. However, although liquefied natural gas (LNG) imports aim to meet the gas demand of thermal power plants on the Atlantic coast, especially during drought periods, these plants do not always rely on this fuel, which has generated upward pressure on local gas prices.
According to the 2017 natural gas sector report, recently delivered by Promigás, there is concern because the wellhead price has had an annual growth of 20 percent since its deregulation in 2013, which has affected the competitiveness of the industry and future demand.
Today, the situation is felt by industrialists, especially those in the Caribbean region, who in a firm contract have to pay between 6 and 7 dollars per million BTU (British thermal unit) and up to 9 dollars for interruptible contracts, when just a few years ago the price was close to 4 dollars.
Users, the affected.
In this last case, the affected are not only the companies but also the users of vehicular gas. The sector guilds warn that this year, when gas tariffs are being negotiated for five years, in which distributors ensure their supply, these upward pressures will be seen.
It adds that next year, when global agencies have forecast an 85 percent probability of a new El Niño phenomenon occurring, consumers will see this reflected in the value of electricity bills, as it is during these times that the thermal park is activated to produce electricity, which will mostly use a more expensive gas (imported and local).
According to the unions, with the exploration and exploitation of the Cesar-Ranchería basin, where the potential for unconventional natural gas exists, the country's reserves could at least triple. The Promigás document shows that Colombia has resources estimated between 20 and 40 trillion cubic feet of unconventional gas (current reserves total 2.89 trillion cubic feet as of 2017), which equates to a range of 20 to 30 years of gas reserves, a situation that would radically change Colombia's energy landscape.
Colombian Association of Oil and Gas