Colombia’s Energy Needs and Resources
The first foreign company to enter into Colombia’s nascent petroleum industry during the early 20th century was the Standard Oil Company. In 1919, Roberto de Mares sold what was then the first petroleum exploration concession in Colombia to the Tropical Oil Company, a subsidiary of Standard Oil. Subsequently, it was not until 1937 that Colombia’s national government passed the “Petroleum Law” regulating the increasingly important industry. In 1951, the Mares concession was transferred from the Tropical Oil Company to the newly created state oil company, Ecopetrol. Between 1951 and the 1980s, the Colombian petroleum industry remained, for the most part, a state monopoly focused on satisfying the domestic demand for energy. It was not until the discovery of major reserves and the perforation of numerous wells throughout the country during the 1980s that Colombia became an oil exporting country.
Colombia’s Energy Needs and Resources
Likewise, during the second half of the 20th century, Ecopetrol managed all exploration and exploitation concessions given to private companies within Colombia. However, this changed in 2003 with the creation of the National Hydrocarbons Agency (ANH), which now oversees the concession and operation of fossil fuel reserves by private companies. In 2004, the ANH awarded its first 28 contracts or concessions to private companies for petroleum exploration and exploitation within Colombia. Subsequently, in 2007, the ANH celebrated its first major round of public bidding for the concession of oil and fossil fuels projects in Colombia. This substantial increase in petroleum activity within Colombia led to a record output of over 1 million barrels per day (bpd) between 2012 and 2015. Nevertheless, Colombia’s currently operating oil fields are old and they are not expected to last more than 6 years, which is why Ecopetrol and the ANH are pushing for new production activities along the Magdalena River as well as offshore exploration along the country’s Caribbean coast. This trend will require deeper and more complex drilling that cannot occur without Foreign Direct Investment (FDI). Furthermore, because Colombia’s reserves consist almost exclusive of heavy sour crude with high sulfur contents, which procure lower prices on international markets, the price of oil has to be high enough to drive bottom-line profits and appeal to private FDI. Additionally, the low quality of Colombia’s heavy crude affects the local economy because the national refining industry is not equipped to process this type of oil.
Therefore, unless there are any major breakthroughs within Colombia’s petroleum industry, it is expected that FDI into this sector will decline during the coming years. A decrease in FDI, a lack of technology to continue extracting petroleum from ever-deeper wells, and a slowdown of Colombia’s oil industry would not only affect a major sector of the country’s economy and the government’s income, but also affect the lives of more than 16.000 Colombians currently employed by the oil industry.
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