Unconventional Reservoirs: opportunity for future fiscal income of $1.5 trillion annually

The development of Unconventional Reservoirs (YNC) would represent an opportunity for Colombia to generate fiscal revenues of 1.5 trillion pesos annually in taxes, contractual economic rights, dividends, and royalties, during the useful life of a typical project. This is stated in the most recent economic report prepared by the Vice Presidency of Economic and Regulatory Affairs of the ACP, which presents an analysis of the economic benefits that the eventual development of this type of reservoir with fracking technique would bring in the future.

• The ACP economic report analyzes the benefits that the development of a conventional deposits project would bring.
• A conventional project would generate 2.5 billion dollars in royalties.
• During its useful life, it could generate 5,000 jobs, both direct and indirect.
• The unconventional deposits would be strategic allies for state financing.

The report highlights the boost to regional development and the positive effect that a single unconventional deposits project could represent as a result of generating 5,000 jobs, both direct and indirect; the generation of 2.5 billion dollars in royalties, and a multiplier effect on local taxes associated with the goods and services chain.

“In a situation like the current one, where the fiscal sustainability of the central government is not guaranteed, unconventional deposits represent an opportunity for Colombia to generate the resources required to finance the National Government's programs and the social development of Colombians,” said Francisco José Lloreda Mera, president of the ACP.

Regarding energy security, the report estimates that unconventional deposits would allow for an increase in the country's hydrocarbon reserves – which are in a declining stage – and generate surpluses for export. This takes into account that, according to the analysis, Colombia has a potential resource of unconventional deposits ranging from 3,000 to 9,000 MBEP, that is, between 2 and 6 times the current proven oil reserves.

“The oil reserves from conventional deposits are being depleted, and in recent years we have recorded a low incorporation, both in crude oil and gas; this scenario not only threatens Colombia's energy self-sufficiency but also exacerbates the macroeconomic problem, hence the importance of encouraging exploration and production in new geological frontiers, including unconventional deposits,” added Lloreda Mera.

Finally, the report presents a general review of international experience, based on academic studies and independent research centers, in which it evaluates the cases of the United States, Canada, Argentina, and the United Kingdom. This analysis concludes that the potential negative impacts of unconventional deposits have not been sufficiently conclusive to veto the activity, while their benefits exceed expectations, both for communities and for economies.

“The experience of these countries that have decades of work has allowed for the improvement of technologies and operational practices to mitigate the risks of the activity, all of this has been captured in the high standards of the current Colombian regulations, and from the industry, we trust that this will be enough to give an opportunity for the development of these resources in the country,” emphasized the President of the guild.

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