The hydrocarbons sector can help Colombia improve its economic and poverty indicators in the next four-year period: ACP

On the brink of a government change in Colombia, the Colombian Association of Oil and Gas presents the economic report Energy policy scenarios and their impact on Colombians, on the contributions that the sector could make to the country in the next four years, and even in this decade. The report presents two scenarios, one of maintaining oil and gas exploration and production (Future A) and, on the other hand, one of weakening oil and gas exploration and production (Future B).

• In Colombia, the sector is composed of more than 500 companies including operators and contractors of goods and services, with a presence in at least 97 municipalities and 19 departments with E&P activities, and has 95 thousand employees.
• If Colombia continues to develop the industry, it would generate revenues for the Nation of $105 trillion in the next four years and $227 trillion by 2032.
• Weakening the industry would result in an anticipated loss of energy self-sufficiency: gas would be imported starting in 2026 and oil from 2028. In addition to losses in tax revenues, royalties, and foreign exchange from exports.

In a global economic context that will be challenging for various countries due to inflationary pressures and the scarcity of energy resources and global supply, the next President of Colombia will require economic resources to execute their government program, which in all candidates' proposals implies an increase in spending. To finance it, the Nation will require an increase in its revenues, either through taxation or by stimulating the economy through sectors capable of generating fiscal resources in large proportions.

In the case of the oil and gas industry, in a sustainability scenario (Future A), it is estimated that the sector would generate revenues for the Nation of $105 trillion in the next four years and $227 trillion by 2032, contributing to the financing of social development programs, economic reactivation, productive and energy diversification, and the fiscal balance of the country. Likewise, it would contribute $38 trillion in royalties during the next government, and $80 trillion by 2032, which, with optimal public policy coordination, would help improve the quality of life in the regions of the country, especially those with the greatest unmet basic needs (benefiting from royalties) and the producing regions.

In contrast, in a weakening scenario (Future B), due to a collapse in production, a loss of $18 trillion in fiscal contributions and royalties from E&P companies to the Nation and the regions is estimated. For example, a producing department like Meta would stop receiving $412 billion in royalties, resources that are equivalent to the income allocated to health and tourism funds of the department; and a non-oil producing one like Chocó would stop receiving $70 billion, which today is equivalent to half of the income of the local health fund of Chocó.

On the other hand, in Future A or the sustainability scenario of the industry, the positive impact is also reflected in the economic and social dynamics of the regions, as it would allow for the procurement of goods and services worth $109 trillion between 2022 – 2026, maintain at least 95 thousand jobs, and boost socio-environmental investments in the regions of at least $1.7 trillion in this same period.

“This is a crucial moment for the country, following the pandemic and the worsening of poverty it caused, there are many challenges in social matters, and this sector can be a great ally in the fight against poverty, as the resources it generates would support the financing of the main development programs of the next government, and would allow leveraging energy and productive diversification, while we take advantage of the oil and gas resources that Colombia has in this unique window of opportunity for the country,” said Francisco José Lloreda Mera, president of the ACP.

Among the most relevant findings of the report, the importance of having national oil and gas (energy self-sufficiency) for Colombia is also highlighted, fundamental to mitigate the cost of public services for electricity, gas, and fuels (gasoline and diesel), and, therefore, the cost of living. Conversely, this situation would change if the country needs to import starting in 2026 (Future B), considering that, with oil and gas imports, the country would be even more vulnerable to international tensions, energy would become more expensive, the inputs used to manufacture everyday products, agricultural inputs, the dollar, interest rates, public and private debt would increase, all of which would impact the cost of living for Colombians and the activity of other productive sectors.

“These scenarios could be the result of the energy policy decisions made by the next government, for the case of Future A, which takes advantage of the opportunity and promotes the development of the industry, and for Future B, which hinders the growth of the sector, hence, as evidenced, the decisions made will have an impact on all Colombians, especially those from oil and gas producing regions, as well as the less favored. With this report, we want to present elements that serve for analysis and responsible decision-making to our future rulers and reaffirm that this industry wants to be an ally of the next Government for the benefit of the country,” highlighted the union leader.

[prefix_calltoaction title=»Economic Report» button_text=»Download» button_link=»https://acp.com.co/web2017/es/publicaciones-e-informes/economicos/848-informe-economico-escenarios-de-politica-energetica-y-su-impacto-para-los-colombianos/file» target=»blank» button_background=»#d0471d»] Energy policy scenarios and their impact on Colombians [/prefix_calltoaction]