The oil and gas industry is ready to be an ally of economic reactivation: ACP

With a possible end to the mandatory preventive isolation at the national level, the oil and gas industry, represented in the ACP, expresses to the National Government and to Colombians, the sector's commitment to the economic reactivation of the country, through foreign direct investment, the supply of fuels, the generation of royalty resources, economic rights and taxes, and job opportunities and productive linkages in the regions of operation.

Likewise, it expresses its interest in continuing to work with the authorities in the different regions to ensure the recovery of economic activity and minimize health risks.

• Private companies in Colombia would be willing to invest around 715 million dollars as part of the resources for reactivation.
• There is an opportunity to advance in the projects that could reactivate and energize investments in the sector and regional economies.
• The balance for the industry, in the first two years of the Duque Government, is positive.

“Private companies in Colombia are ready to invest around 715 million dollars in 2020 as part of the resources that will be fundamental for the reactivation process. We know the potential that the country has in oil and natural gas, onshore, offshore, Unconventional Resources (YNC), among others, which can be a source of income generation and economic dynamism at the national and regional level,” said Francisco José Lloreda Mera, Executive President of the ACP.

According to the 2019 Medium-Term Fiscal Framework, the average income from the sector, only between 2011 and 2018, corresponds to 20% of the current revenues of the Central National Government, in addition to the nearly 4 trillion pesos per year from national fuel taxes, “hence the importance of maintaining that stable income, which is key for the investments that the country needs to execute for economic reactivation after the crisis,” added Lloreda Mera.

In this regard, and in order to facilitate the operations of the sector that would inject resources into the national economy, it is necessary to work on some measures such as adjusting gas pipeline tariffs to competitively transport gas from the Atlantic coast to the interior and west of the country; completing the technical and environmental regulation for the development of offshore exploratory projects in 2021, advancing in pilot projects in YNC, promoting competition in the fuel market, reviewing oil transportation costs, strengthening prevention and attention to social conflict in the regions, ensuring legal security in Prior Consultation processes, and ensuring effective and efficient environmental licensing processes, among other actions that create the conditions for a positive investment environment.

Positive balance after two years of Government

On the occasion of the first two years of the Government of President Iván Duque Márquez, the ACP makes a balance of this period and highlights some of the implemented measures that have had a positive impact on the industry.

Among others, the regulatory measures of the National Hydrocarbons Agency (ANH) are highlighted, which allowed the reactivation of the allocation of new areas and the signing of contracts; the contractual minutes issued by the ANH, which gave a new boost to offshore investments; the call for a Commission of Experts for unconventional reservoirs, the reform of the General System of Royalties, and the promotion of the Territorial Hydrocarbons Strategy to prevent and address social conflict.

As a result of these actions, during this period, 25 contracts were signed onshore, six offshore, and E&P investment in 2018 – 2019 increased 54% vs 2016 – 2017. Likewise, there was an increase in the participation of natural gas (from 10% of investment in exploration focused on gas in 2017 to 20% in 2018 and 2019); the recovery in oil production; the increase in sales of gasoline, diesel, and jet, reflecting greater dynamism in the economy; fuel prices close to international prices, with the possibility of opening greater competition in imports; among other achievements.

“The national government found an industry in slow recovery after the price crisis of 2015, and committed to advancing the diversification of energy sources and increasing oil and gas reserves. Despite this crisis of 2020, with a drop in demand and low prices, we trust that the decisions made previously in these two years and the additional ones proposed to the National Government will contribute to the recovery of the sector and the country in the short and medium term,” emphasized the president of the ACP.