Given the current situation and the critical situation regarding oil and gas self-sufficiency, the industry poses new challenges in order to guarantee the country’s energy security and economic stability. The use of unconventional deposits, continental exploration and renewable energies become an opportunity to position Colombia in terms of investment and development.
Ing. German Espinosa.
President of the Colombian Chamber of Petroleum Goods and Services.
In an interview with the Engineer Germán Espinosa, Executive President of Campetrol, Colombia Energía firsthand learned about the industry’s vision of the current landscape, expectations and future projects. Likewise, the sector’s concern and the consequences that the depletion of energy self-sufficiency would bring to Colombia.
Colombia Energy: What does it mean that 2019 is the year of the oil recovery in Colombia?
Germán Espinosa: The National Government through the Ministry of Mines and Energy and the National Hydrocarbons Agency (ANH) has taken measures in terms of reactivation, such as the permanent process of assigning areas (PPAA). In the first round, 11 contracts were signed, and after 3 years negotiating the offshore exploration minutes, the technical evaluation contracts were transferred to an exploration and production contract. In the second round, the deposit of offers by companies in two segments will be defined. In the first, the ANH will offer a total of 23 projects, being the first time that companies request the incorporation of allocation of areas (27) along with 9 that came from the previous round, that is, a total offer of 59 areas, becoming This is a milestone in the country’s recent oil history. It is then expected that, at the end of the year, there will be around 50 new contracts signed.
CE: Given this opportunity for revival, what can Campetrol say to its affiliates, to the service companies that are part of all this supply?
GE: We have been working with our affiliates in a responsible and serious manner. The sustainability of the hydrocarbons sector necessarily goes through the ‘viability’ of the B&S segment. We are aware of the limitations and difficulties that the sector has in terms of social conflict and development of oil services contracts, but despite this, we have full confidence that this will be improved. For this purpose, we must continue to work together, articulated: Government, Industry and Territory.
CE: What are your expectations for the end of 2019 and the beginning of 2020?
GE: In addition to the revival of the Colombian oil industry, we are facing a new situation that we had not had for offshore projects for more than a decade. Likewise, continental exploration and renewable energies should be deepened, so that this set of projects positions Colombia as an interesting country for the investment and development of the oil and gas industry.
On the other hand, it is essential to change the relationship model of the Government and industry, which for 100 years has been transactional, thus limiting the inclusion of oil and gas within the territory. We have to focus on models where agreements, conversation, dialogue, coordination and agendas shared with the territory prevail, in order to advance all projects for the benefit of the country.
CE: What role does oil and gas play in this energy transition?
GE: They are the sources of resource generation that will allow the transition to renewable energy. This process requires resources, which both oil and gas can leverage. We have to guarantee energy security, that there is abundant, economical and reliable energy availability for Colombian society.
CE: From Campetrol, what do you think are the opportunities that Colombia has if unconventional deposits are developed?
GE: We must generate spaces for dialogue and make agreements at all levels of society regarding the use of unconventional deposits, because with this we are playing the energy security and macroeconomic stability of the country. For our part, we are confident that things are being done well, the State Council is taking all precautions in the case. The issue of fracking will be resolved at the time, we must wait for the verdict of the commissions responsible for the issue.
The decision is not only whether or not to allow the development of YNCs in Colombia. First things first: Fracking is a country decision, and we must understand our current capabilities, think ahead, evaluate what Colombia we want to build in the short, medium and long term, understand the costs of shortages in all its dimensions, and give hydrocarbons and energy development, the same role they play today in developed economies. For Colombia, growing economically without guaranteeing energy sources is unthinkable.
We have a lot of potential in unconventional deposits, an example of this is the middle Magdalena Valley where between 2700 and 7000 million barrels are calculated; however, we have to verify from a technical point of view if these rocks are fracturable, their productivity, the type of fluid and the magnitude. A profitable, economic and mainly sustainable development model that combines the technical, social and environmental part must be built. For this purpose, it is essential to move forward with the pilot projects of integral research (PPIIs), a reliable source of information to assess the risks of its realization in Colombia, and also corroborate the potential that the Non-Conventional Sites have.
CE: What would be the price for Colombia if it ran out of energy self-sufficiency?
GE: In the year 73 we lost oil self-sufficiency and had to import oil, until we discovered Caño Limón. Since that date we have been continuously self-sufficient for 33 years. We are guaranteeing abundant, economical and reliable fuels for Colombian society. If we lose that condition, the cost to the country will be unsustainable, because the first thing that would be affected would be oil exports and this would leave a fiscal gap of an insurmountable size. If that led us to import oil, it would be the collapse of the Colombian economy. In a scenario of shortages, the entire country and first of all the budget of Colombians would be affected.
The cost involved in importing crude would be about $ 30 billion pesos per year, with which the trade balance would fall 6 points of GDP and represent a trade deficit of 8% of GDP. The TRM would depreciate to $ 5.468 pesos per dollar by 2029, and about 4.5 billion pesos in Petroleum Royalties would be lost. Thus, about 3 points in GDP growth would be lost.
In terms of gas, it is even more critical, because Colombian society depends on this resource, so that the economic impacts for the country would be dire. Given the current scenario, by 2023 we may require the importation of foreign gas to meet domestic demand. This would imply the purchase of gas at a price of more than double the internal cost, which would directly affect the finances of households and commercial and industrial establishments, by exponentially increasing the home gas service.
CE: What will we see from Campetrol in the main event of Colombian oil and gas?
GE: We are leading the most important business fair in the sector, a commercial space where the technological innovations of the industry and new forms of energy generation that complement the energy matrix will be visible. We will also have a space for regional dialogue, in which different actors will share experiences related to the contribution of industry to economic, social and environmental development in their communities. On the other hand, in this edition we will be launching an international business conference, in order to promote business and networking spaces between E&P and B&S companies and cross-industry services.
At the Summit we will be launching the book “productive chains.” We believe that if we talk about projects that generate hope for energy security and economic stability in the country, such as offshore, unconventional deposits, continental exploration and renewable energies, we must translate that into benefits for the community , being inclusive and capable of generating productive chains in regional and local terms of goods and services and employment.
If we are not able to do that, we will not have the social license that the projects need to be able to guarantee their sustainability, therefore, the book will be a fundamental contribution in terms of the explanation of what the chains are, how they can be done, how they can be structured and what benefits they will bring to the communities, among other topics, with which we seek that the regions be partners of all development, because without them we believe that this will not be possible.