Major international oil and gas companies are significantly scaling back or exiting operations in Colombia’s offshore exploration and production areas. This shift follows the introduction of stricter regulations under the administration of leftist President Gustavo Petro, who took office in 2022. The combination of tightened regulations and underwhelming results from exploration drilling has led to an increasingly challenging environment for investors in the Colombian oil sector.
Since President Petro’s tenure began, the Colombian government has imposed more stringent rules on conventional oil and gas exploration. There has also been a notable ban on fracking. In November 2022, the government increased taxes on the hydrocarbon sector, which is vital to the nation’s economy. The new tax structure includes a starting rate of 5% that activates when the international Brent crude oil price reaches $67.30 per barrel. This rate escalates to 10% when prices exceed $75 and peaks at 15% at prices of $82.20 per barrel.
The Colombian administration’s efforts to diminish the country’s reliance on fossil fuels have resulted in unintended consequences. Falling oil and gas production has led to increased energy imports, resulting in energy shortages across the nation. These adverse conditions soon prompted major oil companies to reconsider their investments in Colombia’s upstream sector.
Earlier in 2023, Shell announced its decision to cease offshore gas projects in Colombia’s Caribbean, in which it co-owned interests with the state-owned oil company Ecopetrol. Similarly, Chevron has exited its last remaining offshore block, narrowing its operations in Colombia to downstream activities. Company sources confirmed that Chevron maintains a substantial downstream presence in the country, which includes six terminals and over 500 pump stations.
As these multinational corporations scale back in Colombia, they are reallocating resources to other South American countries that are increasingly attractive for exploration investments. Nations such as Brazil and Argentina are emerging as new hotspots for energy exploration, capturing the attention of these companies amid regulatory challenges in Colombia.
The changing landscape of the oil and gas sector in Colombia highlights the complex interplay between government policy and industry response. With ongoing fluctuations in the international energy market, the future of Colombia’s hydrocarbon industry remains uncertain as investors seek more favorable conditions elsewhere.
