With the fall in reserves, is it not justified to sign more oil contracts? – Sectors – Economy

The companies that engaged in the exploration and production of hydrocarbons and the Colombians were waiting for the National Hydrocarbons Agency (ANH) to reveal the reserve report at the end of 2022since it was the fundamental input to make key decisions in this sector.

The Government had assured that it was going to wait for these data to be known to decide whether or not to deliver new oil contracts and, although the figures that were revealed are not very encouraging, the Minister of Mines and Energy, Irene Vélez, remains in her position not to award another contract.

(Also read: Colombia’s oil and natural gas reserves reach for fewer years)

The official assured that public policy is to achieve greater efficiency in existing contracts, because that is “the path of energy transition”. Additionally, he said that the exploration and production of hydrocarbons will continue to be promoted through improved recovery and accelerating a regulation that allows the production of the gas that has been discovered in the Caribbean Sea.

This will be the strategy that the National Government will implement to increase the numbers of oil and natural gas reserves which, at the end of 2022, amounted to fewer years than the data from previous years.

Proven crude oil reserves grew 1.7 percent, mainly due to technical revisions and the increase in the price of a barrel, which averaged US$105 last year.

However, these reserves translate into a self-sufficiency of 7.5 years, less than the 7.6 years at the end of 2021 and implies a drop after five consecutive years of growth. Meanwhile, the new additions, that is, the discoveries presented, only totaled 6 million barrels, a lower value than in 2021, which was 28 million.

(Also read: Despite the fall in reserves, the Government does not change its position on signing new contracts)

Colombia is less self-sufficient in gas

For his part, natural gas proven reserves decreased 11 percentmainly, due to the drop in technical reviews that make already discovered volumes less viable.

This means that Colombia now has less natural gas and enough for fewer years. While in 2021 the life of these reserves was eight years, last year it dropped to 7.2 years, the lowest factor in the past 11 years. The new additions were also lower, 36 cubic gigafoot versus 80 cubic gigafoot of 2021.

“In reserves, the long-term trend matters more than the data of one year. The outlook is not good for all the gas that we are going to need in the transition and oil for tax revenue. need strong policy signals“said the former Minister of Mines and Energy, Tomás González.

For the Colombian Association of Petroleum and Natural Gas (ACP), these results indicate the need to encourage hydrocarbon exploration in order to guarantee the self-sufficiency that the country needs to leverage the energy transition, since the investments made today in exploration will be the production of the country’s future.

Urgency to sign new contracts

Similarly, the report shows the need to encourage the exploitation of resources in order to allow reserves not to continue to decline and Colombia I achieved a successful energy transition taking advantage of the hydrocarbon potential it has.

“This report, which the Government and the country awaited, must lead to a deep reflection regarding whether the conditions are right for ensure self-sufficiency, energy securityand the triple transition that Colombia requires: export, fiscal and energy”, highlights Francisco José Lloreda, president of the ACP.

Meanwhile, Julio César Vera, president of the Xua Energy Foundation, verified that the data and the evidence is showing the government that new contracts are needed. Therefore, it is expected that decisions will be made in this regard and that the extension of exploratory activities to the contiguous areas of blocks currently in production and in mature basins can be allowed.

For his part, Felipe Campos, Investment and Strategy Manager at Alianza Valores, assured that the reserve data revealed by the ANH is “not surprising at all” and that “Colombia should be staying up all night to design an oil and gas exploration and production expansion plan never seen before”.

(Also read: Reserves of the 6 largest oil companies in Colombia are enough for fewer years)

He says that this is essential because oil continues to be very profitable, it is the main source of government income and foreign currency for the country and it will finance the energy transition.

Likewise, he points out that The dollar could drop between 500 and 1,000 pesos (today it is at 4,448.93 pesos)inflation would be reduced to 3 percent, Ecopetrol would be valued at 50 percent, and interest rates would also drop by at least 1 percent due to lower country risk.

These voices also join the demonstrations that have been made from the political arena, asking the National Government to reconsider its decision not to deliver new oil contracts.

For example, the representative to the Chamber, Juan Espinal, assures that the signing of exploration contracts is urgent and necessary, for which reason he asks the Government to “do not allow energy insecurity to be generated in the country”.

Meanwhile, former senator Jorge Enrique Robledo points out that the Government “must promote the signing of new contracts to search for more hydrocarbons. Losing self-sufficiency and having to import them would be catastrophic“.