Energy
Frack on
Colombia is running out of primary oil and gas reserves, if production is to continue at the current 750,000 barrels per day, the reserve and production indicator estimates just 6 to 8 years left. Proposals for fracking are understandably getting attention.
“Pilot wells will be drilled, if the profitability results are as expected, a fracking approval is expected,” excitedly reports the CEO of an oil & gas company operating in Colombia.
A consultant with 30 years of experience operating in Colombia is more cautious, “We are at the preliminary stages, which is why pilots are needed. There is a chance fracking will be profitable but at current prices of USD 30 – 45 it will be hard.”
“Pilot wells will be drilled, if the profitability results are as expected, a fracking approval is expected.”
CEO, Oil & Gas Company operating in Colombia
The oil price isn’t the only challenge.
“Colombia is a socially complicated country and the implementation of projects is difficult, they are usually located in areas with many economic and social needs, and when an extractive company arrives, the communities expect it to do everything that the State has not done,” admits the consultant.
The environmental licensing process is not easy either. Pilots may be licensed without too much difficulty, but large projects will require a whole new process to be completed. This may be particularly challenging for fracking, which is notorious for water pollution and seismic concerns.
The legal environment was also flagged as a concern by the consultant, “Companies run the risk of investing USD 200-300 million to then be told the contracts are not legally viable. Colombia has a tradition of honouring hydrocarbon contracts, but in fracking there have been many obstacles, pilots have been cancelled, etc. A decree was enacted in February 2020 that regulated fracking, but some contracts were signed more than 7 years ago and the pilot has yet to take place; today some USD 500 million has been committed from the companies for the pilots.”
“Companies run the risk of investing USD 200-300 million to then be told the contracts are not legally viable.”
Oil & Gas Consultant with 30 years’ experience, Colombia
Despite these hurdles, the government attitude seems to be favourable towards fracking and has been across several administrations. Although not publicly known, one of our sources reported that fracking pilot wells were drilled under the Santos government but kept quiet so as not to disrupt the Peace Accord negotiations.
With the clean energy transition underway and now the possibility of a fracking boom, Colombia’s energy outlook is set for an upheaval – we are well-placed to help you navigate the changes.
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