Through ‘fracking’, municipalities would receive US$1.000 million

Headwaters would not only benefit from the increase in resources through royalties, the Nation would ensure self-sufficiency and balance of trade.

 Once Colombia takes the path to develop Unconventional Reservoirs (YNC), the biggest prize after the production of this crude will remain in the coffers of the municipalities of the country.

Thus, the territorial entities would end up receiving around US$1.000 million ($3 trillion) each year as additional oil royalties, thanks to what is also called fracking.

For the oil sector unions in the country, with the development of the YNC, not only would the barrier of one million barrels per day of crude produced in previous years be surpassed, but mayors would also receive many more resources from these transfers to invest in social works in the municipalities.

For the Colombian Petroleum Association (ACP), thanks to the increase in oil royalties from the operation of the YNC, municipalities would not only improve their quality of life but would also experience progress.

In various scenarios, Francisco José Lloreda, president of the ACP, has reiterated that municipalities will be the most benefited from this operation, as resources in their budgets would increase considerably.

Likewise, the aforementioned union states that with the same development of the operation, the territorial entities would begin to feel its economic benefits.

“Once the production stage begins, a large amount of employment is generated in the regions and a boost to the goods and services sector, which helps to significantly lower unemployment rates,” it indicates in one of its working documents.

Subsequently, the ACP also specifies that “the development and production operations in YNC require a large amount of inputs, which must be provided by local goods and services industries.”.

PROFIT FOR THE COUNTRY

But not only would municipalities benefit economically from the oil royalties of the YNC and its operation, but also regions and the country would receive their dividends.

Oil companies interested in the development of YNC do not hesitate to point out that their potential resources deposited in the subsoil are estimated between 3 billion and 5 billion barrels.

In addition, the area where the YNC are located is the heart of the transportation infrastructure and is also close to a refinery like the one in Barrancabermeja.

This is the case of Ecopetrol, a company that would focus its YNC development in the Magdalena Medio, where company technicians estimate that there are between 2.4 billion and 7.4 billion recoverable barrels.

“In addition to doubling, tripling, or quadrupling the total crude reserves of the country to ensure self-sufficiency, this development in the mentioned region would generate US$8.500 million in annual investment, which means a great contribution to the economic growth of the country,” states a spokesperson for the oil company.

The source from Ecopetrol also added that 124,000 new jobs would be created, just in the operation of the Magdalena Medio.

For the ACP, greater oil production from the YNC means that the country will have more resources in the coffers to ensure a robust fiscal framework that allows for financial development of the Nation without shocks.

Another economic benefit that would arise from the operation of the YNC would be the increase in exports estimated at US$15.000 million. “This would help close the trade balance deficit,” states Héctor Manosalva, vice president of Development and Production of Ecopetrol, in a presentation.

Sources agree that if the opportunity to develop the YNC is not taken, the country would end up importing oil and gas at higher prices, which would be charged to taxes and would significantly decrease public investment, as it is not easy to replace oil revenue.

GERMANY AND THE U.S. PROVIDE TECHNICAL STUDIES TO THE DEBATE

The technique for the development of Unconventional Reservoirs (YNC) (fracking) is safe and can be developed without risks when the best industry practices are applied and under appropriate regulation, states the National Academy of Sciences and Engineering of Germany (Acatech).

The aforementioned research center, which published a final study on the subject in recent days, reiterated the conclusions reached in a preliminary report delivered in September 2014.

“Based on existing scientific and technical evidence, a ban on hydraulic fracturing or fracking is not justifiable,” states one of the excerpts from the technical document.

This report is generated in the current political debate in which Germany will decide the regulations for the exploration and production of unconventional gas.

The German Parliament is currently organizing sessions with technical and scientific bodies to advance the bill focused on regulating the exploration and production activities of unconventional hydrocarbons, presented by the German Government.

In the same vein, the U.S. Environmental Protection Agency (EPA) reached a similar conclusion.

After five years of data collection, analysis, and research, the EPA confirms that the development of YNC “has not resulted in the systematic generation of impacts on water sources.”.

The aforementioned agency emphasizes that in those extremely rare cases where some contamination has occurred, it has been due to defects in the construction of the wells or in the wastewater treatment process, that is, poor practices “that are not inherent to its development.”.

For the hydrocarbon sector in the U.S., this report, based on the experience of the leading country with commercial production of natural gas YNC, constitutes to date the most comprehensive collection of scientific data, including more than 950 sources of information, technical documents, as well as information from social actors and reviewed technical reports from the EPA.

Alfonso López Suárez
Portafolio Editorial