VOXXI: Colombia’s depleting oil reserves

Colombia's depleting oil reserves
W. Alejandro Sanchez
VOXXI
December 10, 2013
Originally published: http://voxxi.com/2013/12/10/colombias-depleting-oil-reserves/

Amylkar Acosta, Colombia’s Minister of Mining and Energy, has stated that the country’s oil reserves currently amount to around 2,200 billion barrels. However, a division of the Colombian Ministry of Energy, the Unidad de Planeacion Minero Energetica, argues that unless new oil deposits are found, the country will run out of oil by the end of the decade.

In late November, Minister Acosta made the troubling declaration that the South American nation’s oil reserves are running out. Unless new deposits are found, the country’s reserves will be depleted within the next six to seven years. This will cause Colombia to lose its self-sufficiency when it comes to energy.

Colombia’s oil reserves

Acosta has not attempted to disguise the dire status of the situation, as he has declared that Colombia’s energy situation is “severely precarious.”

This is not the first time that Acosta has warned of increasing energy-related costs in the near future for his country. In a September 2013 interview with the Colombian daily El Pais, he categorically declared that the era of “cheap oil in the entire world is over. We have gone from an era of plentiful, cheap and reliable energy sources to a costly era.”

Concerns about Colombia’s oil production and reserves have been discussed widely by the Colombian media. A June 2012 article in the renowned Semana argues that “even though Colombia is not an oil-nation, it depends a lot on this industry.” The article also highlights that up to 40% of foreign direct investment in 2011 was directed to this industry.

Besides the obvious fact that a non-renewable resource is becoming scarce as a result of excessive extraction, the aforementioned Semana suggests that other issues are affecting oil production in the country.

The article mentions protests, the potential for higher taxes on oil industries, and a possible delay in licensing companies to extract oil as reasons why there have been inadequate exploration initiatives for new oil deposits.

Moreover, the article points out the glaring lack of security in oil infrastructure in the country. For example, in 2011 there were 84 reported attacks against oil pipelines and trucks that transport oil.

In fact, as recently as this past December 3, the government accused FARC guerrillas of using explosives to damage the Caño Limon-Coveñas network of oil pipelines in the Norte de Santander department. The pipeline measures 780km and goes to the port of Coveñas, on Colombia’s Caribbean coast, from which it is exported.

Impacts for the future

There is already speculation of how the end to oil deposits could affect the country’s economy.

The website ColombiaReports.co explained that imports increased from “$4.68 billion for September 2012 to $5.15 billion for September 2013, according to a report released by the National Administrative Department of Statistics (DANE).” The principal contribution behind this rise was the 43.8% increase in the import of refined fuels and mining products, a measure enacted by the government in response to major strikes and attacks by Colombian guerrillas on oil pipelines.

Switching from being a net exporter of oil to an importer would place the country at the mercy of international oil prices and fluctuations within oil-producing nations, such as the perpetually unstable Arab world.

One possibility for the near future is that Colombia could approach neighboring nations for oil imports. For example, Venezuela is one of the world’s major oil producers. According to the website of OPEC (Organization of the Petroleum Exporting Nations), “Venezuela’s oil revenues account for about 95 per cent of export earnings [and] The oil and gas sector is around 25 per cent of gross domestic product.”

Nevertheless, it is worth mentioning that even the mighty Venezuela’s oil reserves may be diminishing as well, as “Venezuela’s annual oil production has declined since [the late Hugo] Chavez took office in 1999 by roughly a quarter, and oil exports have dropped by nearly a half,” according to a March 2013 article in the New York Times.

Moreover, as this author explained in an August commentary for VOXXI, Ecuador’s President Rafael Correa has decided to drill in the Yasuni Park for additional oil.

The quest for energy resources may also promote inter-state tensions. For example, Colombia has been involved in a maritime dispute with Nicaragua over the control of a number of islands and the sea in the Caribbean. The two countries went to the International Court of Justice to seek a third-party resolution, which was handed in 2012, but tensions remain. Specifically, Colombia has recently accused Nicaragua of attempting to carry out offshore explorations for oil in Colombia’s sea.

A turn to green energy?

If indeed Colombia’s oil reserves may be gone by the end of this decade, besides a reliance on energy imports, we may also see the country turn to green energy initiatives.

There are occasional reports in the Colombian media about projects regarding alternative energies. For example, a June 2013 article in El Colombiano discusses how Colombia’s rivers could be used to create hydroelectric power, but this has yet to happen due to a lack of incentives from the government.

In fact, during a June 2013 speech at an energy conference in Bogota,Colombian President Juan Manuel Santos mentioned that Colombia’s hydroelectric potential is six times the global average and almost three times the Latin American average.

If Minister Acosta’s worst-case scenario does come true, this crisis may be the incentive needed for Bogota to have its own green revolution and capitalize on its potential for hydroelectricity.