Big Oil Bails on Colombia’s Offshore Oil and Gas Provinces

• Major international oil and gas companies are reducing or ending their offshore exploration and production activities in Colombia due to stricter regulations imposed by President Gustavo Petro’s administration and underwhelming exploration outcomes.
• Since 2022, Colombia has stopped issuing new oil exploration contracts, increased taxes on the hydrocarbon sector, and banned fracking, making the investment environment less favorable for oil companies.
• As Big Oil companies like Shell and Chevron exit Colombia’s upstream sector, they are increasing their investments in other South American countries such as Suriname and Guyana.

Major international oil and gas companies have scaled back or quit operations in Colombia’s offshore exploration and production areas, as the country’s leftist president has imposed stricter rules and exploration drilling failed to live up to expectations.  

Since leftist President Gustavo Petro took office in 2022, the barriers to oil industry investors have increased with tighter regulations for conventional oil and gas exploration and a ban on fracking. 

Colombia stopped awarding new oil exploration contracts while hiking taxes for the economically crucial hydrocarbon sector in November 2022. 

Petro’s administration introduced a scalable surcharge starting at 5%, which kicks in when the international Brent price hits $67.30 per barrel, doubles to 10% when prices are $75 or more and tops out at 15% at $82.20 per barrel. 

The government also attempted to remove royalty payment as a tax deduction for exploration and production companies, although this was eventually overturned by Colombia’s Constitutional Court in a November 2023 ruling.

The current Colombian administration’s quest to reduce the country’s reliance on fossil fuels has had the opposite effect—it became more reliant on energy imports as falling oil and gas production created energy shortages. 

The adverse investment environment was soon felt by Big Oil, which has hastened to quit the upstream sector. 

Earlier this year, Shell said it would pull out of three offshore gas projects in Colombia’s Caribbean which it co-owned with Colombian state-owned oil company Ecopetrol. 

Chevron has also quit its last remaining offshore block and has now reduced its Colombian operations to downstream only, company sources have told Reuters. 

Chevron has kept “a sizeable downstream presence in the country,” the company told Reuters. This includes six terminals and more than 500 pump stations. 

While Big Oil are downsizing in Colombia, they are boosting investments and presence in other South American countries that have become hotspots for exploration, such as Suriname and, of course, Guyana.  

By Michael Kern for Oilprice.com

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