Worrying news out of the Colombian oil sector

The Colombian oil industry, long the driver the country’s economic growth, has become besieged by a multitude of problems. The news is not getting any better, and unfortunately, it seems that the Colombian people will lose out most of all. Cratering global oil prices have had cascading effects throughout the Colombian industry, which will soon be felt by the rest of the Colombian society.

We have talked extensively of the effect that lower oil prices will have on the Colombian government’s revenue. The Colombian Senate just passed a bill designed to address that shortfall and increase revenue by a projected $24.5 billion over the next four years by increasing the government’s share from the sale of each barrel of oil, from 70 to 75 percent. The bill would also impose an additional tax on large, highly profitable companies. The private sector, understandably, is outraged. The Colombian oil industry in particular will be feeling the pinch.

Colombian oil companies plan to lower expenditures on oil exploration in Colombia, despite spending on exploration and drilling in 2014 being far less than was originally expected. According to Reuters, in 2014, the slow and delayed issuance of environmental permits caused the shortfall. In 2015, however, oil companies will be far less eager to secure those permits in the first place.

We have already talked at length in these pages about how important it is for Colombia to invest in oil exploration. The country’s is projected to exhaust its current reserves in 6.5 years, and without a strong increase in investment in exploration, a significant source of government revenue will completely dry up.