The new President of the Colombian Petroleum Association warned on Thursday that Colombia’s fiscal stability will be jeopardized if oil exploration bottlenecks aren’t solved and the country runs out of oil.
“Colombia requires an urgent crash plan to significantly increase [oil] exploration. If the industry doesn’t do this, they can’t increase the reserves of petroleum that they need to achieve the fiscal stability of the country,” said Francisco Lloreda, quoted in Colombia’s Portafolio magazine.
In his first press conference since becoming president of the Colombian Petroleum Association, the industry’s peak body, two weeks ago, Lloreda had stark words about the state of the Colombian oil industry.
He outlined infrastructure difficulties, guerrilla attacks, community disagreements and delays in environmental licensing as significant bottlenecks putting a drag on efforts to push forward with much needed exploration plans.
He said 70% of planned exploratory investments have already been delayed, putting heavy pressure on existing wells, which are estimated to have about 6 more years left of production capacity.
According to Colombia’s La Republica magazine, Lloreda’s remarks introduce sobering uncertainty into the industry that provides 21% of the government’s revenue, putting at risk the future fiscal health of the country. Colombia’s finance minister Mauricio Cardenas reaffirmed the risks.
“For each peso lost from taxes on petroleum production, that will translate into more pesos paid by the average Colombian,” he said.
Looking to hedge the risks of falling government revenue from declining oil reserves, the government has introduced legislation seeking a four-fold increase in the “impuesto patrimonio”, a tax on businesses or individuals with operating revenue of more than $1.5 million. Such a tax change will have to move through Congress, which could significantly delay its approval and implementation.
The government is also looking to loosen the bottlenecks, when last month the ex-ministers of Mining and Defense announced a plan to strengthen infrastructure and decrease guerrilla attacks.