Energy transition in Colombia: column by Armando Zamora – Sectors – Economy

A report of assumptions and wishes cannot be the justification for a decision as transcendental as that of giving up our wealth in the subsoil in exchange for nothing. It is interesting to read the report of the Ministry of Mines and Energy entitled ‘Balance of hydrocarbon contracts and resources available for the just energy transition’ (December 13, 2022). It is light, easy and even fun to read if it were not for the consequences that it could have if the formulation of the country’s energy policy were based on its conclusions.

A first alarm arose when the Colombian Petroleum Association published, days after learning about it, its objections, and other specialized media expressed their doubts. All the alarms went off when Minister Irene Vélez announced at the Davos summit that the decision not to grant more hydrocarbon exploration and production contracts had already been taken, as a sign of «our» commitment to the fight against climate change. .

President Gustavo Petro supported it by announcing that in the few months of his government he had managed to extend self-sufficiency in gas until 2037 or 2042. On her return from Davos, the minister justified her announcement in the aforementioned report. Last Monday, Caracol denounced that the document had been published without the consent of senior Ministry officials, including that of the Vice Minister of Energy, Belizza Ruiz, and officials of the National Hydrocarbons Agency (ANH) mentioned on the cover. Of the report.

(Also: Petro: intervention in public services would put investment in energy at risk).

It is clear what the nature of the report and its objective are, beyond the formalities explained by the minister at the press conference on January 25, and which can be summarized as (i) publish the charges published in the presentation of the document it is common protocol practice; (ii) all of them knew that a report was being prepared; (iii) it is not a report on resources and reserves; and (iv) that it is a report from the Ministry, not from the ANH, prepared by two directors of the office. In this space it is not possible to make an exhaustive analysis of the report, but we will try to understand its nature: it is a ‘damage control’ exercise that seeks to identify scenarios to justify that the decision made will not affect the country’s energy security during the transition.

This is the only way to understand its methodology, which makes speculative estimates on possible reserve addition scenarios, such as:

– improve the historical recovery of oil resources already discovered (from 15.8 to 20.2%); – apply enhanced oil recovery techniques to reach the global historical average (35%); and

– Ensure the development of three large recent gas discoveries (Kronos-Gorgon, Uchuva and Sinú 9) in record time, between 2024 and 2027, which would graduate substantial contingent and prospective resources to reserves.

In summary986 million barrels of oil reserves would be added to the expected results of the remaining exploration contracts (a figure that essentially coincides with the author’s statistical estimates)., 2,971 million barrels with the optimization of primary recovery, and up to 12,900 million barrels with the use of enhanced recovery techniques; that is, 10,000 million more, a figure similar to the total reserves that have been incorporated in the almost 120-year history of this industry in Colombia.

In gas, 2.5 cubic terapies (TCF) would be added to the current reserves of 3 TCF; that is, an 83% increase, with contingent resources (ie, uninsured) coming from the three aforementioned discoveries: Sinú 9 in 2026 and Kronos Gorgon in 2027. These additions would guarantee (if effective on those dates) self-sufficiency until 2037 The report suggests that similar volumes of prospective resources would guarantee self-sufficiency until 2042, and generate surpluses for export, similar to domestic consumption, between 2035 and 2038.

(Keep reading: Possible blackout in Bogotá generates conflicting versions between the Government and companies).

The minister has also been clear in various scenarios, public and private, in which the decision not to sign more contracts was taken since the government program was presented before the last elections, as President Petro has ratified. Indeed, his government proposal says so clearly. The minister hopes that all government institutions and their officials support this decision.

Once the decision has been made, it seems that the minister wants to offer peace of mind to Colombians and close the discussion with some optimistic accounts, based on probabilities and estimated dates of expected exploratory successes and future investment decisions by third parties. That is, the subsequent report justifies the decision, and not the opposite, as it should be.

We all know that government plans are always optimistic and exaggerated, and their execution uncertain and full of unforeseen events.but this industry is larger, more complex, and more volatile than the construction of schools or low-income housing, and than the Bogotá cleaning model.

ARMANDO ZAMORA
Former President of the National Hydrocarbons Agency